What this broker is saying about the Imdex (ASX:IMD) share price

They've been trading sideways lately – but one broker is bullish on the outlook for Imdex shares.

| More on:
woman talking on the phone and giving financial advice whilst analysing the stock market on the computer with a pen

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

The Imdex Limited (ASX: IMD) share price has started the day off in the green and is climbing 2% higher at $2.68.

Imdex shares have rallied 13% this past week, and another 13% this month as well.

That's well ahead of the S&P/ASX 200 index (ASX: XJO) which has posted a loss of 3% in that time.

Why is the Imdex share price gaining ground lately?

Imdex shares had been trading sideways since the company released its FY21 earnings report.

At that time, the provider of technology and equipment to the mining industry's share price popped 11% on the day, but returns had been fairly uninteresting from that point.

That is however until we finished the walk through September, where investors began to show love for Imdex in the markets again.

Despite no price-sensitive news, bullish investors began driving the price action from $2.32 to $2.45 per share in the first week of October.

Then, yesterday, the company announced some positive updates from its annual general meeting (AGM), noting it had made a positive start to FY22.

It stated that Q1 FY22 revenue was already up 41% from the same time last year, and 13% higher than the previous quarter.

This is the highest Q1 top-line earnings result the company has achieved since 2018 by at least $18 million, per the AGM presentation.

Can Imdex keep up the momentum? One leading broker seems to think so. Let's take a look at what investment firm Jeffries is saying about the Imdex share price.

Can Imdex keep growing its earnings?

Jeffries certainly believes it can, especially given the company's record quarterly revenue result. The broker has updated its modelling and raised its earnings outlook for Imdex from the company's updates.

As such, it reiterated its buy recommendation on Imdex shares, which implies analysts see further growth potential as a possibility.

The broker feels there are upcoming catalysts investors might want to consider as well too, as "the pace of recovery continues to surprise to the upside", referring to broad ASX earnings growth and the recovery of the real economy.

With this in mind, it "expect(s) the next catalyst to be earnings and the inherent operating leverage that would drive further upgrades", which it says could be bolstered by product development after the pandemic.

With FY22 revenue coming in so strong this early in the year, the broker lifted its FY22-24 estimates on Imdex's EBITDA by 13-15% and its net profit after tax (NPAT) forecasts by 18-20%.

As The Motley Fool reported in August, some fund managers are seeing this upside in Imdex shares too, with Fairmont Equities managing director providing an optimistic look on the company's shares in a note to clients.

Imdex share price snapshot

The Imdex share price has climbed 55% this year to date and has posted a return of 98% in the last 12 months.

These outsized gains have outpaced the broad index's 12 month return of around 25%.

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Imdex Limited. 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 Bruce Jackson.

More on Materials Shares

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Resources Shares

'I hate what I have done': Mineral Resources share price down as Ellison laments actions

Managing Director Chris Ellison says he deeply regrets the impact of his 'error of judgement'.

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
Materials Shares

Why is this ASX lithium stock jumping to a 52-week high today?

This lithium stock is smashing the market this year despite all the doom and gloom in the industry.

Read more »

Projection of two hands being shaken on a deal.
Materials Shares

Sayona Mining shares sink 13% on Piedmont Lithium merger news and capital raise

This merger will create the largest lithium producer in North America.

Read more »

Miner looking at a tablet.
Materials Shares

Down 28% in 2024, why this ASX 200 lithium stock could now be 'deeply undervalued'

The ASX 200 lithium stock has drawn plenty of investor attention over the past month.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Materials Shares

Buy BHP shares for a 20%+ return

Goldman Sachs expects big total returns from this mining giant.

Read more »

Miner looking at a tablet.
Materials Shares

Here's why ASX uranium shares are ripping higher today

Uranium shares are smashing the markets today.

Read more »

A female broker in a red jacket whispers in the ear of a man who has a surprised look on his face as she explains which two ASX 200 shares should do well in today's volatile climate
Materials Shares

2 ASX 200 lithium stocks to buy for big returns

Which stocks are analysts tipping as buys right now? Let's find out.

Read more »

Young businesswoman sitting in kitchen and working on laptop.
Materials Shares

Is Mineral Resources stock a good buy right now?

This mining share is trading close to multi-year lows. Is this a buying opportunity? Let's find out.

Read more »