ALS Ltd (ASX: ALQ) shares have been on form this year.
Much to the delight of its shareholders, since the start of 2024, the ASX 200 share has risen over 22%.
This leaves the testing services company's shares trading within touching distance of a record high.
But if you thought the gains were over, think again! That's because analysts at Bell Potter are tipping further gains for investors over the next 12 months.
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What is the broker saying about this ASX 200 share?
According to a note from this morning, Bell Potter believes that the company is destined to deliver high single-digit annual earnings growth through to FY 2027. This is thanks partly to a recovery in exploration testing sample volume growth and higher margin value-added services.
Commenting on its positive earnings outlook, the broker said:
We forecast 8.5% EPS CAGR over FY24-27, with revenue and EBIT tracking ahead of the company's FY27 targets ($3.3b and $0.6b, respectively).
This outlook is underpinned by: (1) a recovery in exploration testing sample volume growth from FY26 and further take-up of higher margin, value-added services; (2) high single-digit organic revenue growth in Environmental driven by increased penetration and regulation in traditional markets and rapid growth in PFAS testing demand in the USA and key markets in Europe; (3) further business development success at Nuvisan and ongoing progression of the €25m (~A$43m) cost-out program (>50% complete), delivering significant profitability improvements by FY26; (4) greater demand for CRO services in Europe once the BIOSECURE Act is legislated in the USA; and (5) further scope growth in the Life Sciences segment through programmatic acquisitions.
'Compelling value'
In light of the above, its analysts "see compelling value" in the ASX 200 share at current levels.
This has seen the broker initiate coverage on its shares today with a buy rating and $17.30 price target, which implies potential upside of 9.6% for investors over the next 12 months.
In addition, a partially franked dividend yield of 2.4% is expected by the broker in FY 2025, boosting the total potential return to 12%.
Bell Potter summarises its bullish view as follows. It said:
We see compelling value in ALQ as an investment leveraged to increasing societal demands for green environmental testing practices, stringent enforcement of PFAS remediation and monitoring programs and a recovery in global exploration testing volumes and regional (European) CRO activity. ALQ should continue to create value through its targeted capital allocation framework, delivering >15% ROCE.
