Are you on the hunt for some big returns for your investment portfolio? If you are, then it could be worth looking at the ASX 200 stock in this article.
That's because it has been tipped by a leading broker to rise over 40% from current levels.
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Which ASX 200 stock?
The stock that is being tipped to generate big returns is Premier Investments Ltd (ASX: PMV).
Following the recent divestment of its Apparel Brands business and stake in Myer Holdings Ltd (ASX: MYR), it is now focused on the popular Peter Alexander and Smiggle brands. It also owns a major stake in appliance manufacturer Breville Group Ltd (ASX: BRG).
The team at Bell Potter believes that recent share price weakness has created a compelling opportunity for investors to buy the ASX 200 stock at a cheap price.
According to the note, the broker has reiterated its buy rating on the company's shares with a trimmed price target of $30.00 (from $34.00).
Based on the current Premier Investments share price of $20.75, this implies potential upside of almost 45% for investors over the next 12 months.
In addition, the broker is expecting the company's shares to provide investors with a fully franked 4.9% dividend yield in FY 2025.
If this proves accurate, this would mean a total potential return of approximately 50% for the ASX 200 stock between now and this time next year.
Why is it a buy?
Bell Potter believes that the company's shares are being undervalued by the market and deserve to trade on significantly higher multiples.
In light of the strong potential returns on offer here, this ASX 200 stock has been named as a key pick in the retail sector. The broker concludes:
Our Price Target decreases to $30.00/share (prev. $34.00), as we eliminate the MYR shareholding together with the ownership in AB post the completion of the divestment on 28-Jan-25 within our sum-of-the-parts based valuation. We continue to utilise a 17x multiple for PA, 13x for Smiggle and a current market valuation for Breville Group (BRG).
We view PMV as trading at a discount to the rest of our coverage post the market sell-off, considering the Premier Retail division with two global roll-out worthy brands and a P/E of ~12x excluding equity investments, land bank/cash. We retain PMV as a key pick within our Retail Sector coverage and maintain our BUY rating.
