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Every month, analysts at Morgans pick out their best ASX stock ideas.
These are the ASX stocks that the broker thinks offer the highest risk-adjusted returns over a 12-month timeframe. Morgans notes that they are supported by a higher-than-average level of confidence.
Among its best ideas for June are the two ASX 200 stocks listed below. Here’s what the broker is saying about them:
TechnologyOne Ltd (ASX: TNE)
Morgans thinks that this enterprise software provider’s shares are a great option for investors this month and has added them to its best ideas list.
The broker likes the ASX 200 stock due to its large cash balance, strong returns, and impressive track record of earnings growth. It said:
TNE is an Enterprise Resource Planning (aka Accounting) company. It’s one of the highest quality companies on the ASX with an impressive ROE, nearly $200m of net cash and a 30-year history of growing its earnings by ~15% and its dividend ~10% per annum. As a result of its impeccable track record TNE trades on high PE. With earnings growth looking likely to accelerate towards 20% pa, we think TNE’s trading multiple is likely to expand from here.
Morgans has an add rating and $20.50 price target on its shares. This implies potential upside of 12% for investors.
Another new addition to its best ideas list in June is testing services company ALS.
The broker highlights the ASX 200 stock’s (sustainable) leadership position as a reason to buy. It also believes that ALS is about to deliver margin improvements, which will be a boost to its earnings. And with copper and gold prices at high levels, it believes demand for its services will be strong. The broker commented:
ALQ is the dominant global leader in geochemistry testing (>50% market share), which is highly cash generative and has little chance of being competed away. Looking forward, ALQ looks poised to benefit from margin recovery in Life Sciences, as well as a cyclical volume recovery in Commodities (exploration). Timing around the latter is less certain, though our analysis suggests this may not be too far away (3-12 months). All the while, gold and copper prices – the key lead indicators for exploration – are gathering pace.
Morgans has an add rating and $15.50 price target on the company’s shares. This suggests that they could rise 7% from current levels. It also expects a dividend yield of almost 3% over the next 12 months.