Recently, analysts from broker E.L. & C. Baillieu Limited released a report sharing their top stock picks. The report details 9 small and medium cap stocks from various sectors listed on the ASX. Here I have selected 5 companies that show great potential in the medium- and long-term.
Adairs Ltd (ASX: ADH)
Adairs is a home furnishings retailer with more than 160 specialty stores in Australia and New Zealand. Analysts upgraded Adairs from a hold to buy rating, citing the company's continued store network expansion, strong underwritten sales growth and robust online growth. In addition, the trading environment is expected to improve for Adairs with lower interest rates and tax cuts leading to better consumer confidence.
Ardent Leisure Group (ASX: ALG)
Ardent Leisure Group is the owner and operator of leisure and entertainment centres in Australia and the US. The company reported encouraging results, with revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) growing 14% and 16%, respectively, in FY19.
Although earnings are still below levels seen prior to the Dreamworld accident in 2016, analysts are optimistic and have a buy rating on the company. Ardent plans on reinvesting in new rides and attractions at Dreamworld and resuming new site rollouts in FY20.
Bapcor (ASX: BAP)
Bapcor is a trade company focused on the sales and distribution of aftermarket automotive parts. Despite experiencing what it labelled the 'toughest' industry conditions since listing, Bapcor was still able to deliver 9% in earnings growth in FY19. Apart from the retail business, all segments in the company reported improved operating results. Analysts expect sales momentum to improve and for Bapcor to re-establish itself as a reliable profit and dividend growth stock.
EQT Holdings (ASX: EQT)
EGT Holdings is a financial services company offering funds management, private client and superannuation services. Analysts have maintained a buy rating on EQT, citing the company's robust outlook, strong balance sheet and solid cash flow. EQT reported a 12.7% increase in net profit after tax (NPAT) for FY19 and management believe that industry and regulatory tailwinds will provide new business and acquisition opportunities.
Hansen Technologies (ASX: HSN)
Hansen Technologies provide IT systems and services that support billing platforms for the utilities and telecommunications industries. Although EBITDA was down 6.9% for FY19, Hansen maintains excellent cash flow, with recurring maintenance and support fees driving group revenue. Analysts have maintained a buy rating on Hansen, citing that the company offers value with excellent cash flow, diversified earnings and a long-term customer base. Hansen is also expected to benefit from the depreciating Australian dollar, which could drive future acquisitions.
Foolish takeaway
Although brokers conduct thorough analysis before publishing these reports, it is important that investors do their own research before buying shares in the companies listed. I think a more prudent strategy would be to keep an eye on these companies and their relevant sectors and wait for positive price action before making an investment decision.
Other companies analysts listed as their top stock picks in the report included Monadelphous Group (ASX: MND), MNF Group (ASX: MNF), Steadfast Group (ASX: SDF) and Village Roadshow (ASX: VRL).
