The team at Macquarie Group Ltd (ASX: MQG) has been running the rule over Steadfast Group Ltd (ASX: SDF) shares this week.
And if you're looking for market-beating returns, it could be one to consider adding to your portfolio.
What is Macquarie saying about Steadfast and its shares?
Macquarie has been looking at industry data and appears relatively pleased with what it saw. The broker said:
According to our latest market data, May '25 was a strong pricing month for Business Pack and Strata. Weaknesses remained in Personal and Commercial Motor. 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.
Within SDF's portfolio: The main challenge during the month of May '25 was Strata at -4.8%. We estimate a portfolio with SDF's product mix would have achieved +6.2% pricing in the Mar '25 qtr, and would be on pace to slow to +5.5% in the Jun '25 qtr.
In light of this, Macquarie has made no changes to its earnings and dividend forecasts for Steadfast over the next few years. It continues to forecast earnings per share growth of 10.9% in FY 2025, 6.9% in FY 2026, and then 3.5% in FY 2027.
This is expected to underpin dividends of 20 cents per share in FY 2025, 21 cents per share in FY 2026, and then 22 cents per share in FY 2027.
How much upside is there?
According to the note, the broker believes there is potential for some market-beating returns for investors that buy in at current levels.
This morning, the broker has reaffirmed its outperform rating and $6.80 price target on Steadfast's shares.
Based on its current share price of $5.96, this implies potential upside of 14% for investors between now and this time next year.
And as mentioned above, dividends of 20 cents per share and 21 cents per share are expected this year and next. This represents dividend yields of 2.9% and 3.5%, respectively, which boosts the total potential 12-month return to approximately 17%.
Commenting on its outperform rating, the broker said:
Outperform. 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.
