Wouldn't it be nice to double your money with an investment?
Well, that's what could happen with the cheap ASX stock in this article, according to analysts at Bell Potter.
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Which ASX stock?
The stock that could be seriously undervalued, according to the broker, is AMA Group Ltd (ASX: AMA).
It is the largest accident repair group in Australia with approximately 140 vehicle panel repair shops.
Bell Potter highlights that the market doesn't appear to believe the stock will achieve its earnings guidance in FY 2026. It said:
The current AMA share price suggests the market has some doubt whether the FY26 guidance of normalised EBITDA pre-AASB 16 of $70-75m is achievable after the company reported $30.5m in H1. We, however, believe the guidance is well achievable as, firstly, Q3 and Q4 are typically seasonally strong quarters and, secondly, the guidance only implies a similar underlying 2HFY26 result relative to 2HFY25.
There is actually some prospect of a better 2HFY26 result relative to 2HFY25 after CEO Ray Smith-Roberts suggested on the recent 1HFY26 result call that a margin approaching the medium term target of 10% may be achievable in 4QFY26. Our Q3 and Q4 margin forecasts are 6.7% and 8.3% – which put us comfortably within the guidance range – so a margin closer to 10% in Q4 could see a full year result towards the top end of the range.
Huge potential returns
In light of this, Bell Potter believes the ASX stock deserves to trade on higher multiples and is tipping huge potential returns over the next 12 months.
According to the note, the broker has put a buy rating and $1.25 price target on its shares. Based on its current share price of 62 cents, this implies potential upside of 100% for investors.
Commenting on its buy recommendation, Bell Potter said:
There is also no change in our target price of $1.25 which we only recently updated with the release of the H1 result last month. We note that, at the current share price, the EV/EBITDA multiple – using our pre-AASB 16 forecasts – is only 4.4x in FY26 and 3.8x in FY27. We also note even the PE ratio looks reasonable on 29x in FY26 and 15x in FY27.
And we remind that the Balance Sheet is in good shape with net debt of $21m at 31 December and is expected to be lower at 30 June with the seasonally stronger H2. We also highlight there is the prospect of a resumption of dividends this year with a forecast final dividend of 1.0c depending on M&A activity.
