Steadfast Group Ltd (ASX: SDF) shares are missing out on the good times on Tuesday and dropping into the red.
At the time of writing, the insurance broker company's shares are down almost 2% to $5.83.
Investors appear to have been selling the company's shares after switching out of stocks that could be described as safe haven assets and back into risk-on assets.
Is this a buying opportunity for investors? Let's see what analysts at Macquarie Group Ltd (ASX: MQG) are saying about the company.
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Are Steadfast shares a buy?
The good news for shareholders and potential future shareholders is that Macquarie sees a lot of value in Steadfast shares at current levels.
A note this week highlights that its shares are trading at a discount to international brokers. It said:
Valuation: 2-yr forward PE multiple relative to international brokers: SDF is trading at a ~14.6% discount (vs a 4.6% long-term premium) to international brokers.
Though, it acknowledges that industry data was surprisingly weak in April. It adds:
According to our latest market data, Apr '25 was an unusually weak period for Home, Commercial Motor and Workers Comp, while strength appeared for Business Pack. The June quarter represents ~30.0% of the annual GWP placed for Commercial Lines on the Sunrise Platform, and ~27.1% of Personal Lines placed via the broker channel.
The main challenge during the month of Apr '25 was Strata. We estimate a portfolio with SDF's product mix would have achieved +6.2% pricing in the Mar '25 qtr).
Nevertheless, it remains positive and thinks investors should be snapping up shares right now.
Big return potential
According to the note, Macquarie has retained its outperform rating and $6.80 price target on Steadfast's shares.
Based on its current share price of $5.83, this implies potential upside of almost 17% for investors over the next 12 months.
In addition, the broker is forecasting fully franked dividends of 20 cents per share in FY 2025 and then 21 cents per share in FY 2026. This equates to attractive dividend yields of 3.4% and 3.6%, respectively.
This boosts the total potential return on offer with the company's shares to over 20%.
Commenting on its bullish view of the stock, the broker concludes:
Over the long term, the ability to maximise returns on a US roll-out is key to SDF's long-term value, and we believe management can thread the needle. At current valuations, we retain our Outperform recommendation.
