If you want to make an investment that has the potential to deliver market-beating returns, then the ASX 200 stock in this article could be a contender.
That's the view of analysts at Macquarie Group Ltd (ASX: MQG), which are feeling bullish on this name.
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Which ASX 200 stock?
The stock that Macquarie is bullish on is SGH Ltd (ASX: SGH).
Previously known as Seven Group Holdings, SGH is a diversified operating and investment company that owns industrial services, media, property and other businesses. This includes Westrac, which operates Caterpillar dealerships.
Macquarie highlights that the company has reiterated its guidance for FY 2026 despite facing some challenges in the first quarter. It said:
While Boral would have faced some weather challenges in 1QFY26, its operational performance was good, while solid performances in WesTrac, improvement in Coates (TU >60%) and stronger Media interests' performance than consensus estimates all likely aided in a reiteration of FY26 guidance for LSD to MSD EBIT growth.
A detailed assessment of key markets points to the challenging backdrop for Boral in 1QFY26 in NSW, with 15 days with rainfall above 5mm in rapid succession. Conversely, conditions in Victoria and Southeast Queensland were conducive to uninterrupted trading. Operational performance continues to improve.
And with the broker not expecting any further interest rate cuts in Australia, it concedes that momentum could be hit in residential construction. Nevertheless, it feels confident with its forecasts. It said:
Resi improving, but choked? Leading indicators of residential construction activity are improving. However, with rate reduction support now slowing (we expect no further cuts), it could stint momentum somewhat. We have not altered forecasts though, as we did not expect material further stimulation from our former reduction rate profile.
Big returns from this ASX 200 stock
According to the note, the broker has retained its outperform rating on the ASX 200 stock with a slightly improved price target of $53.60.
Based on its current share price of $45.08, this implies potential upside of 19% for investors over the next 12 months.
And with a modest 1.5% dividend yield expected in FY 2026, the total potential return stretches to approximately 20%.
Commenting on its outperform recommendation, the broker said:
Maintain Outperform. The stock's valuation is relatively extended in historic terms. However, this is supported by SGH's execution, peer valuations and the prospect of M&A. The group noted intent to reduce leverage to <2x EBITDA 'absent material M&A' — SGH have earned their M&A right, in our view.
