The ASX 200 has been volatile lately, but that hasn't stopped analysts from identifying pockets of real opportunity.
In fact, several high-quality companies are now trading at valuations that suggest potential for significant upside over the next 12 months.
For example, the two ASX 200 shares listed below have been named as buys by analysts and tipped to rise 40% or more. Here's what they are recommending:
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Sonic Healthcare Ltd (ASX: SHL)
Sonic Healthcare could be a cheap ASX 200 share to buy.
This leading diagnostic company has been struggling over the past couple of years after COVID-19 testing revenue dried up.
However, with a clean slate and organic growth returning, now could be a good time to snap up shares.
Demand for pathology and diagnostic services is both essential and growing, supported by ageing populations and increasing prevalence of chronic disease. Sonic continues to invest in automation, digital workflow optimisation, and efficiency improvements, all of which are expected to support margin expansion over the medium term.
Bell Potter is positive on the company. It said:
One can expect SHL to generate solid mid-high single digit organic EPS growth with addon benefit of acquisitions to drive double-digit growth on a normal basis. SHL is a sold compound generator, which is why it holds appeal in our view.
The broker has a buy rating and $33.30 price target on its shares. Based on its current share price of $23.19, this implies potential upside of 44% for investors over the next 12 months. It also expects an attractive 4.7% dividend yield in FY 2026.
Xero Ltd (ASX: XRO)
Another ASX 200 share with potential to rise strongly is cloud accounting leader Xero.
It has delivered consistent growth for more than a decade, and the company continues to benefit from the global shift toward digitised financial management. At the last count, it boasted 4.59 million subscribers and annualised monthly recurring revenue of NZ$2.7 billion.
However, this is just a fraction of its total addressable market, which is an estimated 100 million small businesses globally. Clearly, there is scope for a significant increase in recurring revenue over the next decade. Especially with management aiming to grow its average revenue per user metric alongside its subscribers.
In light of this, the team at Macquarie thinks investors should be taking advantage of recent share price weakness. It said:
Mgmt is walking the walk, making data-driven decisions that invariably lead to better capital allocation outcomes. We have high conviction in >12mo story, driven by the US opportunity. Gusto and Melio are the platform for US growth and mgmt is executing quickly. Reiterate Outperform.
Macquarie has an outperform rating and $230.30 price target on its shares. This suggests the upside of 91% is possible from current levels.
