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2 ASX shares that Morgans would buy after excellent results

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Reporting season has arrived, and finally the market focus is on company performance rather than external factors beyond our control, like inflation and wars.

So, halfway through the month, which are the ASX shares that look attractive after their latest financials?

Morgans analysts had a couple of ideas:

Computershare Limited (ASX: CPU) already had an ‘add’ rating at Morgans, but the team has further lifted its future expectations after this week’s results.

“Computershare’s FY22 management EPS [earnings per share] was +10.6% on the pcp [prior corresponding period] and came in slightly above full-year guidance,” senior analyst Richard Coles said on the Morgans blog.

“With FY23 guidance for +55% EPS growth, interest rate leverage appears to trump other concerns near term, in our view.”

The ASX share is one of those unusual businesses that benefit from rising interest rates.

This is because it holds funds yet to be paid out to investors, such as dividends. Computershare invests that pool, with the returns going straight to its bottom line.

Morgans has upgraded Computershare’s 2023 and 2024 earnings forecasts by 9% to 13% to reflect “higher margin income assumptions going forward”.

“Computershare is a quality franchise that has delivered solid returns and consistent growth over time,” said Coles.

“The company remains well positioned to benefit from rising global interest rates, and initial signs from the Wells Fargo Corporate Trust acquisition remain positive.”

The Computershare stock price has gained 14.7% year-to-date.

‘One of the highest quality franchises’

Real estate classifieds provider REA Group Limited (ASX: REA) has also retained an ‘add’ recommendation at Morgans, even though earnings forecasts were lowered slightly.

“REA remains one of the highest quality franchises in our coverage,” said associate analyst Steven Sassine on the Morgans blog.

“And whilst FY23 may exhibit some volatility (e.g. macro impacts on listings volumes), we believe management has levers to potentially pull (e.g. yield) in such an environment.”

The financial result this week showed it was slightly ahead of consensus expectations for revenue, but “a slight miss” on earnings due to higher operational expenditure.

“The continued strength of the Australia residential business was a key highlight of the result in our view with revenue growth of +24% on pcp to ~$777 million.”

The REA share price has dipped almost 23% so far this year.

Fairmont Equities managing director Michael Gable also picked this ASX share as a buy earlier this week, citing how the share price seems to have passed the bottom.

“Mid-June, everyone was pricing in silly interest rates. What they’re pricing now isn’t so silly,” he said.

“It’s starting to make sense that we should get a bit of a recovery here.”

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