Top broker tips Australian Clinical Labs (ASX:ACL) share price to shoot higher

This broker thinks ASX investors should get better acquainted with this ASX share…

| More on:
A young man pointing up looking amazed, indicating a surging share price movement for an ASX company

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

The Australian Clinical Labs Ltd (ASX: ACL) share price is pushing higher on Monday.

In afternoon trade, the pathology services provider's shares are up 2% to $3.76.

Despite this gain, the Australian Clinical Labs share price is still trading 6% below its May IPO price of $4.00.

Why is the Australian Clinical Labs share price pushing higher?

Investors have been buying the company's shares this morning following the release of a bullish broker note out of Goldman Sachs.

According to the note, the broker has initiated coverage on the company with a buy rating and $4.80 price target. Based on the current Australian Clinical Labs share price, this implies potential upside of almost 28% over the next 12 months.

Goldman Sachs was the joint lead manager and underwriter of the company's IPO last month.

What did Goldman Sachs say?

Goldman believes that Australian Clinical Labs will benefit from a series of operational investments. These include its unified Laboratory Information System and upgraded central laboratory network.

In addition to this, over the long term, the broker expects the company's growth to track around market growth of 3% to 5%. However, it sees scope for the company to achieve the upper end of this range if it executes well on growth strategies in New South Wales and Queensland.

Furthermore, it notes that with leverage of 1.0x net debt/EBITDA, there is the opportunity to accelerate its growth through acquisitions.

Attractive valuation

Another reason to be positive on the Australian Clinical Labs share price is its valuation. Particularly in comparison to rivals Healius Ltd (ASX: HLS) and Sonic Healthcare Limited (ASX: SHL).

Goldman commented: "We believe current trading multiples are undemanding: FY22E EV/EBITDA 6.8x (vs. HLS 9.1x; SHL 11.3x) and FY22E EV/EBIT: 16.2x (vs. HLS 20.1x; SHL 17.6x)."

"Whilst the forward EBIT growth profile of +4% (FY22-25E) is less attractive than HLS (+7%), it is above SHL (+2%), and hence in-line with the peer average. ASX 200 HC [healthcare sector] trades on 21x EBITDA for +8% CAGR," it added.

This could make it worth considering if you're looking for healthcare options.

James Mickleboro does not own any shares 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 recommended Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

a man looks down at his phone with a look of happy surprise on his face as though he is thrilled with good news.
Broker Notes

3 of the best ASX stocks to buy now with $2,500

These shares are highly rated by the team at Bell Potter.

Read more »

Man smiling on top of rocks with mountains in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors were in a nervous mood today.

Read more »

A man in suit and tie is smug about his suitcase bursting with cash.
Broker Notes

2 big-name ASX 200 shares brokers rate as top buys

Let's see which shares could be in the buy zone right now.

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Block, Catalyst Metals, Coronado Global, and Pilbara Minerals shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
Share Gainers

Why Beach Energy, Boss Energy, Cochlear, and Light & Wonder shares are pushing higher

These shares are having a good time on hump day. But why?

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Mergers & Acquisitions

Guess which ASX 300 stock is jumping 7% on merger news

This struggling company could be close to merging with a rival.

Read more »

a man in hard hat and high visibility vest talks into a walky-talky device in the foreground of a freight train at a railway yard.
Share Market News

What does the new BHP contract means for Aurizon shares?

This broker sees upside based on a new deal between Aurizon Holdings and BHP. 

Read more »