With the ASX roaring back towards its previous highs, you might think the scope to nab a bargain share is severely limited.
But there are pockets of value amongst this sea of high valuation multiples.
QBE Insurance Group Ltd (ASX: QBE) has recently seen its share price dip by 5% over the past month and now trades at a price-to-earnings ratio (P/E) of 9.4 times.
That means you are paying less than $10 for every $1 of this insurance giant's earnings. Compare that to the ASX 200, where you are paying nearly $18.50 at the time of writing.
In other words, this ASX insurance giant might just be too cheap to ignore. Let's see what the experts think.
Image source: Getty Images
Why QBE could be an ASX bargain share
QBE's recent price drop could present an attractive entry point for investors based on analyst price targets on the stock.
Analysts at Goldman Sachs are optimistic about QBE's prospects, maintaining its buy rating in an August note.
The broker highlights that QBE's rate increases continue to "be ahead of loss cost inflation", a key factor in maintaining profitability in the insurance sector.
Moreover, QBE's ability to effectively pass on rate increases positions it well against inflationary pressures.
Part of its buy rating is that QBE's valuation is "not demanding," suggesting to me that it is an ASX bargain share.
It rates the stock a buy with a price target of $20 per share. This suggests a potential upside of around 24% over the next 12 months.
Meanwhile, consensus rates QBE a buy as well, according to CommSec.
Dividends might add to the appeal
QBE isn't just a value play on price – we have to factor in the dividend yield.
At the current share price, the ASX bargain share's trailing dividend yield sits at 4.4%. But we don't get paid for what's already happened.
Goldman Sachs projects QBE's dividend to increase to 81 cents in FY24 and 86 cents the following year.
These forecasts translate to dividend yields of 5% and 5.3%, respectively.
This is ahead of consensus forecasts. According to CommSec, consensus estimates project a payment of 76.7 cents per share this year.
In total, if QBE meets Goldman's expectations, investors could see a combined return of approximately 28% over the next year, considering both capital gains and dividends.
Can it get there? The insurance giant doubled net profits to US$802 million in H1 FY24. Gross written premium (GWP) also grew by 1.9%.
Looking ahead, QBE's guidance for FY25 includes a combined operating ratio of around 93.5% and expected GWP growth of 3%.
In my view, this is positive for this ASX bargain share.
Foolish takeaway
QBE's recent price dip could be a tactical buying opportunity for those looking to add an ASX bargain share with income potential to their portfolios. Experts also have a bullish outlook on the company.
QBE shares are up 9% in the past 12 months.
