Now could be a good time to buy Elders Ltd (ASX: ELD) shares.
That's the view of analysts at Bell Potter, which believe this ASX 200 stock could generate big returns over the next 12 months.
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What is the broker saying about this ASX 200 stock?
Bell Potter notes that the Elders share price has come under pressure since announcing a potential acquisition late last year. It feels this has created a buying opportunity, particularly given its belief that the future is bright for the agribusiness company. It said:
The underperformance of ELD post announcement of the Delta transaction in Nov'24, has seen the stock shed 15% of its EV, seeing the base business trade at ~10% EV/EBITDA discount to pre-transaction levels.
Bell Potter highlights that there are three key drivers for Elders which could underpin a rerating of its shares to higher multiples. These are base business growth, Delta (acquisition) leverage, and livestock leverage. In respect to the base business, the broker said:
The base ELD business is forecast to generate $155- 160m in FY25e EBIT. Executing on backward integration ($15m margin opportunity); delivering on SYSMOD ($11m margin opportunity); annualising 1H25 acquisitions ($2m in FY26e); and non-recurrence of the SA drought ($12m margin recovery), would provide a pathway to $190-200m by FY27e. This would imply FY24-27e compound EPS growth of ~14% accounting for Nov'24 equity dilution in the base ELD business.
Big return potential
According to the release, Bell Potter has retained its buy rating and $9.10 price target on the ASX 200 stock.
Based on its latest share price of $6.15, this implies potential upside of 48% for investors over the next 12 months.
In addition, it is forecasting dividends yields of 5.8% in FY 2025 (50% franked) and 7% in FY 2026 (fully franked). This boosts the total potential return beyond 50%.
Commenting on its buy recommendation, the broker said:
Our buy rating is unchanged. Executing on existing initiatives and leverage to cattle prices are expected to drive double digit EPS growth through to FY27e. Achieving a favourable outcome on Delta or deploying the $245m in capital already raised to finance the transaction would likely accelerate this growth profile. Importantly, we don't see any value ascribed for completion of Delta or execution of the base business strategy in the current ELD share price.
All in all, this could make the ASX 200 stock one to consider if you are looking for major upside and an attractive dividend yield.
