A rare buying opportunity in 1 of Australia's top shares?

There are not many ASX shares I'd describe as one of Australia's top shares, but Pinnacle Investment Management Group Ltd (ASX: PNI) is one of them.

It's not often that one of the best businesses on the ASX trades a lot cheaper, but that's what has happened with Pinnacle.

What does Pinnacle do?

Pinnacle is involved in the investment sector – it takes stakes in investment managers and helps them grow.

It has an expanding portfolio of investment managers, with a recent focus on growth in the northern hemisphere.

Its portfolio includes Hyperion, Plato, Palisade, Resolution Capital, Solaris, Antipodes, Spheria, Firetrail, Metrics, LongWave, Riparian, Coolabah Capital, Aikya, Five V Capital, Langon, Life Cycle, Pacific Asset Management, VSS and Advantage Partners.

Aside from a track record of success, a key reason why independent fund managers would agree to a minority investment is that Pinnacle can take over certain services, allowing the fund manager to focus on investing rather than behind-the-scenes work.

Some of those services include seed funds under management (FUM), working capital, distribution and client services, fund administration, compliance, finance, legal, technology and so on.

In my view, this is the right time to invest in one of Australia's top shares amid a 40% decline since January 2025.

Strong underlying performance

With such a large decline, you'd think the business would not be reporting good growth numbers. However, it is still delivering solid underlying performance.

In its FY26 result, Pinnacle reported that aggregate affiliate FUM rose 13.3% to $229.4 billion, with net inflows of $33.4 billion for the year. Pleasingly, international FUM rose 45.6% year-over-year to $74.9 billion.

It also reported underlying net profit after tax (NPAT) rose 21% to $138 million and underlying earnings per share (EPS) grew 15% to 61 cents. The company's share of affiliate net profit rose by 5% to $136 million.

I think most of Australia's top shares would be happy with EPS growth of 15%, considering FY26 was a challenging year.

Solid dividend yield

Following the large decline of the Pinnacle share price, its dividend yield is now quite sizeable.

In FY26, it paid an annual dividend per share of 60 cents. That translates into a grossed-up dividend yield of around 5%, including franking credits. That's not the biggest dividend yield on the ASX, but it's a pleasing and consistent dividend.

I believe the payout can grow in the coming years as earnings increase.

Very appealing valuation as one of Australia's top shares

Following the significant decline of the Pinnacle share price, its valuation now looks very appealing to me considering its potential earnings growth outlook.

According to the projection on Commsec, the business could generate EPS of 87 cents in FY27. That means the business is trading at 17x FY27's estimated earnings. It's currently projected to see EPS growth of 20% in FY28 and 21% in FY29.

I think the business looks significantly undervalued, given its valuation and potential profit expansion.

The post A rare buying opportunity in 1 of Australia's top shares? appeared first on The Motley Fool Australia.

Motley Fool contributor Tristan Harrison has positions in Pinnacle Investment Management Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Pinnacle Investment Management Group. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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