Buy this ASX 200 stock for a 21% return: Broker

Big returns could be on the cards for buyers of this stock according to Bell Potter.

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The Australian share market has traditionally delivered an average annual return of around 10%.

While that is a great return, the team at Bell Potter thinks you could potentially double this return with the ASX 200 stock in this article.

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Image source: Getty Images

Which ASX 200 stock?

The stock that Bell Potter is recommending to clients is ALS Ltd (ASX: ALQ).

It is a global testing, inspection, and certification (TIC) company, servicing clients across several industries.

Bell Potter notes that ALS commands a market-leading position in geochemical testing, leveraging its hub-and-spoke model, Laboratory Information Management System (LIMS) and innovative value-added capabilities.

In Life Sciences, it operates one of the largest global environmental testing businesses, with a footprint spanning 35+ countries.

It released its full-year results on Monday and delivered numbers that were largely in line with Bell Potter's expectations. It said:

ALQ's FY26 result was headlined by uEBIT of $599m, up 19.3% YoY and in line with BPe. Group uEBIT margin expanded 130bps to 18.0% (BPe 17.5%).

Key points: Operating result: Group organic revenue growth of +8.4% (BPe +9.1%), was led by Commodities (+18.1%; BPe +16.6%), with mixed performance reported at Life Sciences (+2.8%; BPe +4.8%). Expanding exploration activity in 2H across Junior, Intermediate and Major customers delivered an acceleration in sample volume growth and improved pricing dynamics, with lower-priced legacy contacts rolling off as guided.

It also notes that its guidance for FY 2027 was also in line with expectations. The broker adds:

Outlook commentary include: 1) FY27 Minerals organic revenue expected to rise 13.0-15.0% YoY (BPe old 14.5%), with 1H FY27 uEBIT margin to be consistent with 2H FY26 levels, then rising a further 30-50bps in 2H FY27; and 2) Life Sciences targeting mid-single digit organic revenue growth in FY27 (BPe old 4.6%), with incremental EBIT margin improvement of 30-50bps (BPe old 44bps).

Big potential returns

According to the note, Bell Potter has retained its buy rating on the ASX 200 stock with a trimmed price target of $26.00 (from $28.00).

Based on its current share price of $21.83, this implies potential upside of 19% for investors over the next 12 months.

In addition, a partially franked 2.3% dividend yield is expected in FY 2027, boosting the total potential return to approximately 21%.

Commenting on its buy recommendation, Bell Potter said:

Our downgraded Target Price reflects a higher WACC of 8.3% (previously 7.8%). We view the FY27 Minerals revenue and EBIT margin outlook as conservative, with FY26 exit-rates and exploration market indicators suggesting Minerals could deliver organic revenue growth of >20.0% in FY27 (BPe new 14.9% – within guidance).

Motley Fool contributor James Mickleboro 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.

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