Want to outperform? This ASX 200 stock could generate a 35% return in 12 months

Goldman Sachs is tipping 'multi-year mid-teens earnings growth' from this stock.

| More on:
A young woman holds her hand to her mouth in surprise as she reads something on her laptop.

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

It has been a volatile week for IDP Education Ltd (ASX: IEL) shares.

Investors were scrambling to buy the ASX 200 stock on Wednesday after it impressed the market with its half-year results.

The student placement and language testing company's shares were up over 15% following the release.

However, a day later, IDP Education's shares gave back all these gains and some more and are now trading lower than they were pre-results release.

While this is disappointing, the team at Goldman Sachs is likely to see it as a buying opportunity for investors.

Why this ASX 200 stock could be a buy

Goldman was impressed with the result and remains positive on the company's outlook despite regulatory tightening measures across its primary destination markets. It explains:

IEL reported a strong 1H24 result, however investor focus has rightly shifted to the outlook for 2H24/FY25 given regulatory tightening measures across IEL's primary destination markets.

In our view, in an environment of softer market volumes, quality agents that can provide genuine students from a diversity of source markets should be well-placed to gain share, and IEL's 1H24 result was an initial validation of this thesis (industry volumes -3% vs IEL +33% yoy).

In respect to its language testing business, the broker has trimmed its earnings estimates to reflect regulatory changes. However, it believes the business will return to growth once the market normalises. Goldman said:

[W]e adopt a more cautious stance and reduce our FY24/25/26E volume estimates -4%/-11%/-8% – now forecasting high single digit volume declines in both FY24/25E. Into the medium term, we remain of the view that IELTS can resume growth once Indian market dynamics normalise, particularly given ex-India volumes are growing at a high-teens pace with expansion opportunities into underserved markets such as Africa.

Big returns ahead

Goldman has reiterated its buy rating on the ASX 200 stock with a new price target of $26.60 (from $27.60).

Based on its current share price of $19.99, this implies potential upside of 33% for investors over the next 12 months.

And with Goldman forecasting a 46 cents per share partially franked dividend in FY 2024, this represents a 2.3% dividend yield, boosting the total potential return beyond 35%.

Goldman concludes:

IEL is likely to emerge through this period of short-term regulatory tightening with a more diversified business and stronger SP market position to capitalise on the long-term structural growth in international education, setting up the company for multi-year mid-teens earnings growth. On that basis, the shares represent attractive value, and we reiterate Buy

Should you invest $1,000 in Web Travel Group Limited right now?

Before you buy Web Travel Group Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Web Travel Group Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

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 positions in and has recommended Goldman Sachs Group and Idp Education. The Motley Fool Australia has recommended Idp Education. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Broker Notes

Happy man working on his laptop.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

Two funeral workers with a laptop surrounded by cofins.
Broker Notes

Macquarie just forecast this ASX 300 dividend share could surge 37%. Here's why

Atop its passive income payouts, Macquarie expects this ASX dividend stock could leap 37% in a year.

Read more »

An unhappy man in a suit sits at his desk with his arms crossed staring at his laptop screen as the PointsBet share price falls
Materials Shares

Does Macquarie rate James Hardie shares a buy, hold or sell?

The company is set to report FY25 earnings this week.

Read more »

A man looking at his laptop and thinking.
Industrials Shares

Which ASX 200 industrials stock does Macquarie expect to sink 40% over the next 12 months?

Can this name build it's way out of such negative sentiment?

Read more »

Five retirees do a conga line dance on the beach celebrating the special dividend announced by Grange Resources today
Broker Notes

Why Macquarie thinks the NZ retirement village sector could be an emerging opportunity for ASX investors

Oceania Healthcare and Summerset could quietly emerge as high-upside plays for patient ASX investors.

Read more »

Excited couple celebrating success while looking at smartphone.
Broker Notes

5 high-conviction ASX 200 shares to buy

Brokers are tipping these shares as buys. Here’s what they rate highly.

Read more »

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

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

Happy woman working on a laptop.
Broker Notes

Macquarie's best ASX 200 share picks in each of the 11 market sectors

Looking for stock-buying opportunities?

Read more »