Premier Investments Ltd (ASX: PMV) could be a compelling S&P/ASX 200 Index (ASX: XJO) stock to watch, in my opinion.
This company owns the retail businesses Smiggle and Peter Alexander and a substantial portion of Breville Group Ltd (ASX: BRG) shares.
It recently sold its apparel brands to Myer Holdings Ltd (ASX: MYR) and then divested its Myer shareholding to Premier Investments shareholders.
The remaining business has a number of positives, which a leading broker has picked as an opportunity.
The ASX 200 stock is too cheap
According to reporting by The Australian, broker Morgan Stanley recently said the ASX retail share had a price/earnings (P/E) ratio of 15x based on the forecast profit for the 2026 financial year.
Morgan Stanley's analyst Joseph Michel said the P/E ratio was "too cheap" for the newly simplified business. He suggested that now the apparel business sale to Myer was completed, the new structure should "reduce the conglomerate discount".
Michel noted that Premier Investments owned 100% of Peter Alexander and Smiggle and approximately a quarter of appliance maker Breville. He added (courtesy of The Australian)
The risk/reward for PMV is compelling at 15x FY26 P/E for a mix of high quality consumer brands, with multiple growth levers like Peter Alexander offshore and capital management options with net cash $275m.
Interest rate cuts also provide earnings upside risk.
Broker rating on Premier Investments shares
Morgan Stanley kept its rating on the ASX retail share as overweight, meaning a buy. However, following Premier Investments' shrinking size, the broker reduced its target price on the business from $37.50 to $32.
The price target is the broker's estimate of a company's share price 12 months from the time of the investment call.
The Morgan Stanley price target implies that the broker is suggesting that the Premier Investments share price could rise by more than 30% from its current level.
If that projection comes true, it would likely be a market-beating return because the ultra long-term return of the ASX 200 stock index is around 10% per annum.
