ALS Ltd (ASX: ALQ) shares have been strong performers over the past 12 months.
During this time, the testing, inspection, and certification (TIC) company's shares have risen almost 20%.
Can the run continue? Let's see what one leading broker is saying about this ASX 200 share.
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What is being said about this ASX 200 share?
According to a note out of Goldman Sachs, its analysts think that ALS shares are now close to being fully valued.
But before we go into that, let's look at what the broker thought of the company's results release this week. In response, it said:
FY25a Organic revenue growth was 6.5% yoy for Life sciences with 9.8% growth in Environmental testing and 6% growth in food testing while Pharma organic revenues (exc Nuvisan) increased 1.8%. We expect organic momentum to continue (MSD-HSD) complemented by margin expansion in FY26e.
Recent acquisitions diluted margins in FY25a (segment margin -60bps vs +105bps for legacy operations). But with legacy margin expansion (20-40bps guided), continued Nuvisan cost out (gross EUR 11m) and benefits from integration of Wessling and York we forecast 60bps segment margin expansion in FY26 (+100bps ex A$5-10m flagged headwind from regulatory changes in Mexico).
Goldman has made some changes to its earnings estimates to reflect its positive performance. It explains:
We came into the FY25e results below consensus with a relatively cautious view on Minerals operating leverage (this risk was evident in the April update). However, as noted previously, this is likely to abate progressively through Fy26e prompting a 2% uplift in our Commodities segment earnings and 1% uplift to EBIT at the group level (our Life Sciences forecast is unchanged with MSD organic growth + annualization of recent acquisitions and margin expansion). While the share count increases ~4%, this is offset by a lower FY25e tax rate, interest savings (only ~25% of funds raised to be deployed in FY26) and a higher EBIT sees our EPS increase 2% to 73.1c.
Shares downgraded
The note reveals that Goldman has downgraded the ASX 200 share to a neutral rating with a trimmed price target of $17.70 (from $17.80). While this still implies potential upside of 8% from current levels, it is not enough to warrant a buy rating.
While the broker feels that ALS deserves to trade at a premium to peers, it thinks it is reaching its limit now. It said:
ALQ is trading on a NTM EV/EBIT of 16.8x GSe, which compares with the TIC median of ~14x. We believe that ALQ likely warrants a premium given it over-indexes commodities, which appear to have inflected higher (complemented by an expanding addressable market). However, on an EBIT growth adjusted basis (NTM EV:EBIT / 3yr EBIT CAGR) it is broadly in line with the peer set (1.7x vs an average of 1.9x).
