Down 30% in a month: Broker says buy this ASX 200 share now

Big returns could be on the cards for buyers of this beaten down stock.

| More on:
A financial expert or broker looks worried as he checks out a graph showing market volatility.

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 tough few weeks for Johns Lyng Group Ltd (ASX: JLG) shares.

Since this time last month, the ASX 200 share has lost over 30% of its value.

Investors sold off the insurance building and restoration services company's shares late last month in response to the release of a disappointing full year result.

Johns Lyng reported a 9.6% decline in revenue to $1.16 billion and an 8.5% lift in EBITDA to $129.6 million. This was short of its guidance for revenue of $1.2 billion and EBITDA of $136.4 million.

Adding to the disappointment was management forecasting further declines in revenue and EBITDA in FY 2025.

The good news is that one leading broker believes its shares have bottomed now and is urging investors to pick them up while they are down.

ASX 200 share to rebound

According to a note out of Morgans, its analysts have an add rating and $5.10 price target on John Lyng's shares. Based on its current share price of $3.72, this implies potential upside of 37% for investors over the next 12 months.

In addition, the broker expects a modest 2.1% dividend yield in FY 2025 and then a 2.4% dividend yield in FY 2026.

Overall, that's a total potential 12-month return close to 40% for investors that buy this ASX 200 share at current levels.

What did the broker say?

Morgans notes that Johns Lyng has announced a deal to acquire a large stake in Keystone Group.

It is one of Australia's leading Insurance Building & Restoration Services (IB&RS) businesses. Keystone services a recurring blue-chip customer base providing insurance repairs, restoration and hazardous material removal through its subsidiaries, Rizon, Remeed, and Corvex.

Morgans is a fan of the transaction and highlights that it will provide further scale to its domestic operations and increased exposure to commercial and large loss claims work. Commenting on the deal, it said:

JLG has announced that it will extend its domestic Insurance Building and restoration presence via the acquisition of ~87.5% interest in Keystone Group for an upfront consideration of $47.7m and an earnout of up to $21.4m over FY25/26. We see Keystone as highly complementary to JLG's existing IB&RS business, which provides further scale to the group's domestic operations (particularly within QLD) as well as increased exposure to commercial and large loss claims work. Incorporating Keystone into our forecasts see our EBITDA upgraded by ~7% in FY25-27F, while increased level of debt to fund Keystone (and SSKB & Chill-rite), sees our EPS forecasts increase ~4%. Our Add rating is retained with a $5.10 PT.

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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Johns Lyng Group. 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

Two people tired and resting after sports race.
Broker Notes

Fundie rates 2 ASX 200 stocks in short-term pain but with long-term gain potential

Blackwattle Investment Partners sees these 2 ASX 200 stocks as worthy of a buy and hold strategy.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Broker Notes

Guess which beaten down ASX share is rocketing 11% today

Why are investors buying this beaten down stock? Let's find out.

Read more »

Broker working with share prices on computers.
Broker Notes

These 3 ASX All Ords stocks just got sizeable broker upgrades

Top brokers expect strong performance from these ASX All Ords stocks.

Read more »

Man pointing an upward line on a bar graph symbolising a rising share price.
Broker Notes

Morgans says these ASX 200 stocks can rise 30%

Big returns could be on the cards for buyers of these shares.

Read more »

Successful group of people applauding in a business meeting and looking very happy.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

A group of stockbrokers sit in a room with several computer screens in front of them as they discuss the Zip share price and Zip's merger with Sezzle
Broker Notes

Here are the latest broker rating changes on 3 prominent ASX shares

Brokers have delivered a mixed bag this week.

Read more »

Two people climb to the summit and raise their arms in success as the sun rises brightly over the mountains.
Financial Shares

'Strong momentum': 2 ASX financial shares backed by top fundie for 2025

ASX financial shares had a strong trading session on Tuesday with several new price records set.

Read more »