If you're looking for an ASX value stock amid the current market volatility, you're not alone. In times like this, high-quality businesses trading at attractive valuations can stand out.
Helia Group Ltd (ASX: HLI) might be one of those options for investors looking for value stocks, experts say.
Currently trading at $3.79 per share on Friday, the business is trading at a price-to-earnings (P/E) ratio of just 4.4 times.
That means investors are paying just $4.40 for every $1 of the company's profits.
Comparatively, at the time of writing, they are paying more than $18 per dollar of earnings to buy the iShares Core S&P/ASX 200 ETF (ASX: IOZ).
Helia stands out as a potential bargain in the market. But is it actually an ASX value stock? Let's see what the experts say.
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ASX value stock with upside potential
Helia Group operates in the lender's mortgage insurance (LMI) sector. Its share price has fluctuated in 20224.
Investors sold the ASX value stock after Commonwealth Bank of Australia (ASX: CBA) said it was tendering its LMI contract with the business. This is an important revenue stream for Helia.
But the stock has shown resilience. In fact, after this initial drop, Helia's shares rebounded nearly 15% in a single day following a broker upgrade from Macquarie.
Macquarie analysts believe Helia is well-positioned to retain this crucial contract, citing the company's strong track record in winning similar tenders and its long-standing relationship with CBA.
They see Helia as a bargain ASX stock, setting a price target of $3.90 per share, around a 5% upside from the current price.
Goldman Sachs also weighed in on Helia's prospects, highlighting that the tender process with CBA is not new.
The broker pointed out that Helia's contract with CBA is up for renewal for the second time in three years.
Besides, Goldman believes the financial impact of losing the contract would be minimal until 2027, as the current contract doesn't expire until the end of 2025 anyway.
It prices the ASX value stock at $4.53 per share, suggesting more than 22% upside from its current price and a P/E ratio of 5.4 times.
Consensus also rates Helia a buy, according to CommSec.
In addition to its value appeal, Helia offers a partly franked dividend yield of 7.7% at the time of writing.
Conclusion
With a P/E ratio of just 4.4 times, Helia is trading at a valuation that many investors might find hard to ignore.
Brokers are also bullish on the stock. But just because it is trading at a low valuation doesn't automatically make it an ASX value stock. It's the underlying business that's important.
As always, remember to conduct your own due diligence and talk to a professional whenever needed before making any investment decisions.
