The ASX bank share Judo Capital Holdings Ltd (ASX: JDO) could deliver significant returns if analysts are right about its prospects.
Judo provides loans to small and medium businesses, with integral sources of funding being business term deposits, SMSF term deposits and personal term deposits.
The business is well-liked by a number of analysts, including the broker UBS. Let's take a look at why investors are excited about the business.
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Strong earnings growth expected
The company recently reported its FY25 result which showed a number of positive growth statistics.
Gross loans and advances (GLA) grew by 16% to $12.5 billion, which was the mid-point of its guidance, reflecting almost 2x the growth of the overall loan system. The company attributed this to its differentiated and customer-led value proposition, as well as successful expansion into regional areas. Deposits increased by 20% to $9.9 billion.
The ASX bank share reported that underlying profit before tax (PBT) rose by 14% to $125.6 million and statutory net profit after tax (NPAT) increased 24% to $86.4 million.
UBS said Judo is tracking in line with expectations and it remains constructive about the investment case and long-term growth potential.
The broker noted analysts are expecting earnings per share (EPS) to grow at a compound annual growth rate (CAGR) of around 36% over the next three years, compared to 2% for the sector. It thinks the company could achieve around $180 million of profit before tax in FY26, representing growth of around 50%.
UBS believes the Judo share price should trade at close to a price/earnings (P/E) ratio of 25, reflecting a "scarcity premium around growth" for global banks and the S&P/ASX 200 Index (ASX: XJO).
The broker is forecasting the ASX bank share could deliver net profit of $126 million in FY26 and $242 million by FY29.
ASX bank share price target
Let's look at the size of the potential returns. A price target is where analysts think the business will be trading in 12 months from now.
UBS currently has a price target of $2.20 on the ASX bank share. That means the broker is suggesting that the Judo share price could increase by 27% over the next year. If it achieved that level of return, I think it'd be highly likely to beat the ASX 200's return.
Excitingly, the broker is currently projecting that the business could start paying a dividend in FY27, equivalent to a 1% dividend yield. That payout could grow to a 2.5% dividend yield in FY28 and a 2.9% dividend yield in FY29.
Overall, the future looks very positive for the ASX bank share.
