There could be some big returns on offer at the smaller side of the market.
That's the view of analysts at Goldman Sachs, which have just reiterated buy ratings on three mid-cap ASX shares following the broker's annual Emerging Leaders Conference.
Let's now take a look at the three shares that could offer returns of 20% to 50% over the next 12 months:
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IPH Ltd (ASX: IPH)
Goldman Sachs has a buy rating and $8.70 price target on this intellectual property services company's shares. This implies a potential upside of 47% for investors from current levels. And with the broker forecasting 5.6%+ dividend yields through to at least FY 2026, the total potential return stretches beyond 50%.
Goldman believes the company is positioned for solid growth in the coming years. It commented:
In our view, IPH is well-placed to deliver consistent and defensive earnings with modest overall organic growth. We expect Asia to be the fastest growing region for IPH (c.10% volume growth p.a. over the medium term), as the company leverages its strong market share in Singapore to grow in other Asian markets.
Macquarie Technology Group Ltd (ASX: MAQ)
Another mid-cap ASX share that Goldman is bullish on is data centre, cloud, cybersecurity, and telco company Macquarie Technology. It has a buy rating and a $93.00 price target on its shares, which suggests a potential upside of almost 20% for investors.
The broker is feeling very positive about the company's data centre operations. It said:
MAQ is poised to demonstrate the acceleration of its data centre growth pipeline through 2024, both from IC3W (now DA approved and underway, with potential to be upsized from 38MW to 45MW) and a new site in the Sydney metro area. The core Cloud Services / Telco businesses are performing well in the interim, and valuation remains compelling relative to listed peers.
Readytech Holdings Ltd (ASX: RDY)
Finally, Goldman thinks that this enterprise software provider could be a top mid-cap ASX share to buy. It has a buy rating and a $4.25 price target on its shares. This implies a potential upside of 21% for investors from current levels.
The broker believes its valuation is compelling based on its growth outlook and compared to peers. The broker explains:
Valuation is compelling at <20x NTM P/E and ~25x EV/FCF against a ~20% FY23-26E EPS growth outlook, particularly when considering subscription revenue now represents >85% of the total. We also remain well below the company's FY27 targets on revenue (A$155mn vs >A$170mn target) and EBITDA margin (~34% vs high 30s target).
