ASX financial stock Steadfast Group Ltd (ASX: SDF) is set to outperform its peers over the next 12 months while the big four ASX 200 bank shares remain overvalued, according to top broker Macquarie.
Let's find out why.
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ASX financial stock trails bank shares on price growth
In the year to date, the big four ASX 200 bank shares have continued their remarkable run of share price growth. Meantime, Steadfast shares (pink line) have risen but not as much, as the following chart shows.
Here's what is happening with the big four ASX 200 bank shares today:
- The National Australia Bank Ltd (ASX: NAB) share price is $37.36, down 1.03%
- The Westpac Banking Corp (ASX: WBC) share price is $30.53, down 0.46%
- The ANZ Group Holdings Ltd (ASX: ANZ) share price is $29.58, down 0.32%
- The Commonwealth Bank of Australia (ASX: CBA) share price is $137.43, down 0.99%
Meantime, fellow ASX financial stock Steadfast is down 1.24% at $6.37 per share.
Steadfast is the largest general insurance broking network and the largest underwriting agency group in Australasia.
The network provides services to broker businesses in Australia, New Zealand, Asia and London.
Macquarie sees a bright period ahead for the Steadfast share price compared to the big four bank shares.
In its latest model portfolio update, Macquarie has an underperform rating on all four major ASX 200 bank shares, which sit in its model income shares portfolio.
Macquarie has chosen only one other ASX financial stock for its model income portfolio, which is Suncorp Group Ltd (ASX: SUN).
Steadfast sits in the growth shares portfolio with an outperform rating for the next 12 months. This is the only ASX financial stock Macquarie has selected for its model growth portfolio.
Macquarie's price targets on these 5 ASX financial stocks
Here are Macquarie's 12-month price targets for all five of these ASX financial stocks:
- Price target of $32.50 on NAB shares, implying a potential 13% downside
- Price target of $26 on Westpac shares, implying a potential 14.8% downside
- Price target of $26.50 on ANZ shares, implying a potential 10.4% downside
- Price target of $95 on CBA shares, implying a potential 30.9% downside
- Price target of $6.70 on Steadfast shares, implying a potential 5.2% upside.
What will drive this ASX financial stock higher?
Macquarie expects Steadfast to deliver earnings per share (EPS) growth of 13.7% in FY24 and 8% in FY25.
It tips a return on equity (ROE) of 13.2% in FY24 and 12.4% in FY25.
It expects Steadfast's price-to-earnings (P/E) ratio to fall from 22.5x in FY24 to 20.8x in FY25.
Steadfast will release its full-year FY24 results on Thursday.
