2 ASX shares buy-rated by experts that could take off

These stocks have very strong earnings outlooks.

| More on:
A group of people in suits watch as a man puts his hand up to take the opportunity.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • UBS identifies oOh!Media Ltd and Breville Group Ltd as ASX shares with potential returns exceeding 20% within a year.
  • Despite recent setbacks, UBS expects oOh!Media's earnings and margins to improve with a price target suggesting a 30% rise supported by strong contract wins and a projected 14% EBIT CAGR over three years.
  • Breville faces production challenges but is rated as a buy due to potential market expansion in China and high-growth product categories, with a price target indicating a 22% rise.

Experts are regularly picking out some ASX shares as buys, but it's a smaller group of businesses that analysts think could deliver a total return of more than 20% in less than a year.

Broker UBS has picked out a few names that it not only rates as buys, but could deliver a significant performance that would likely be market-beating.

I'll highlight two of these stocks that don't get many headlines but may deliver both pleasing earnings growth and capital returns.

oOh!Media Ltd (ASX: OML)

UBS describes oOh! Media as the largest out-of-home media company in Australia and New Zealand, with a market share of approximately 40%. It operates a network of tens of thousands of digital and static advertising locations, including roadside, retail centres, airports, train stations, bus stops, office towers and universities.

The broker acknowledged the oOh!Media share price fell after its result because of a 2% earnings miss, a noticeable increase in capital expenditure and revenue growth slowing to 5% in the third quarter of FY25.

UBS believes its lower margins were a one-off impact and unlikely to be repeated going forward. The broker said it's comfortable with the ASX share's capital expenditure increase because it comes off the back of a significant amount of contract wins and ramp-up, which "should be viewed as a positive and supports the stock's growth outlook".

The broker suggests the business is appealing because it could grow operating profit (EBIT) at a compound annual growth rate (CAGR) of 14% over the next three years, which it thinks is attractive considering it's trading at a projected forward price/earnings (P/E) ratio of 11.

UBS is expecting revenue growth of between 6% to 7%, with rising profit margins for the company.

The broker has a price target of $2 on the business, which implies a possible rise of 30% within a year.

Breville Group Ltd (ASX: BRG)

Another business that UBS really likes is Breville, which sells small electrical kitchen appliances through its global product and distribution segments.

The business is currently facing headwinds from tariffs and needs to move production outside of China for its 120V products.

UBS noted that there is a "wide range of potential outcomes" depending on the company's ability to "increase prices (and reduce discounts), improve mix (moving to higher margin retailers) and manage costs".

The broker has a buy rating on the ASX share based on its high growth coffee machine total addressable market, the opportunity to scale in new markets like China and the low level of market penetration should support at least a doubling of sales over the next 10 years.

UBS thinks FY26 represents a transition year and the market should look to the potential from FY26 with operating profit (EBIT) growth of 16%. Utilising production in Mexico could make a big difference, as well as further labour cost savings in geographies outside of China.

According to the forecasts from the broker, the Breville share price is valued at 26x FY28's estimated earnings. The price target of $39.80 implies a possible rise of 22% over the next year.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Growth Shares

A woman wearing dark clothing and sporting a few tattoos and piercings holds a phone and a takeaway coffee cup as she strolls under the Sydney Harbour Bridge which looms in the background.
Growth Shares

3 Australian shares to buy and hold for 20 more years

Let's see why these shares could be among the best to buy and hold until the 2040s.

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Growth Shares

Top ASX shares to buy now for long-term growth

Let's see what makes these shares top long term picks for Aussie investors.

Read more »

Person pointing finger on on an increasing graph which represents a rising share price.
Growth Shares

2 ASX growth shares to buy now while they're on sale

These businesses are trading too cheaply, in my opinion.

Read more »

A woman with strawberry blonde hair has a huge smile on her face and fist pumps the air having seen good news on her phone.
Growth Shares

These ASX innovators could be the market's next big winners

Analysts think these exciting shares could be top buys.

Read more »

Green arrow with green stock prices symbolising a rising share price.
Growth Shares

These 2 ASX growth shares are ideal for Australians

I think these investments have a lot to offer investors.

Read more »

Green stock market graph with a rising arrow symbolising a rising share price.
Growth Shares

Experts rate these 2 ASX growth shares as buys for December!

Analysts are bullish about the prospects of these businesses.

Read more »

Happy man holding Australian dollar notes, representing dividends.
Growth Shares

2 ASX stocks to help turn $100,000 into $1 million

Let's see why these shares could be great compounders over the next decade and beyond.

Read more »

Sport trainer talking to little girl who is climbing wooden ladder in gym.
Growth Shares

Why I think these 2 ASX growth shares are great buys today

These two ASX growth shares look like top buys. Here’s why.

Read more »