Smartgroup Shares The Most Overbought On The ASX, At 5 Year High

Smartgroup Corporation shares (ASX:SIQ) have surged to their highest level since 2019, closing 1.45% higher at A$11.18 on Tuesday, capping a remarkable 23.13% year-to-date rally that has left the novated leasing specialist as the most overbought stock on the Australian Securities Exchange by some technical measures.

The SIQ share price touched an intraday high at A$11.32, extending a powerful uptrend that has seen the stock’s RSI climb to 89.76, well above the 70 threshold typically considered overbought. Despite the stretched technical picture, buying momentum has remained robust as markets digest a string of positive fundamental developments centred on margin expansion, digital transformation success, and accelerating electric vehicle adoption.

Fundamentals Driving the Smartgroup Rally

At the heart of the rally lies Smartgroup’s FY25 full-year result, delivered in February 2026, which exceeded market expectations across key metrics. Revenue climbed into the high single digits to approximately A$329 million, while EBITDA advanced roughly 14% to around A$135 million. More significantly for markets focused on quality and operating leverage, EBITDA margins expanded to approximately 41%, representing a two-percentage-point improvement year-on-year that signalled the company’s digital investments are translating into tangible bottom-line benefits.

Management attributed much of the margin improvement to its ongoing digital transformation program, which has streamlined customer acquisition, servicing, and fleet management processes. The company reiterated plans to achieve full technology modernisation by 2028, with A$11 million to A$13 million of technology capital expenditure earmarked for 2026. Rather than viewing this spend as margin-dilutive, markets have interpreted the investment as growth-enabling, positioning Smartgroup to capture a larger share of the novated leasing market while maintaining or improving profitability.

The volume metrics underpinning the earnings beat have been equally impressive. By mid-2025, Smartgroup was servicing approximately 570,000 customers, including around 484,000 active salary packaging customers, an increase of roughly 82,000 over the prior 12 months. New lease vehicle orders surged 19% year-on-year in the first half of 2025, with settlements up 8%, demonstrating sustained demand despite broader macroeconomic uncertainty around consumer spending and interest rates.

A key driver of volume growth has been the company’s exposure to the electric vehicle transition. Smartgroup has benefited from favourable fringe benefits tax treatment for eligible EVs and plug-in hybrid electric vehicles, which has made novated leasing an attractive proposition for employees in healthcare, education, government, and not-for-profit sectors. While internal combustion engine vehicles still represent a significant portion of the lease book, providing diversification, the EV momentum has given the stock an ESG-aligned growth narrative that resonates with institutional investors.

Strategic partnerships announced throughout 2025 have further bolstered the bull case. Smartgroup inked new agreements with BMW Financial Services and Volkswagen Financial Services Australia to support its novated leasing offerings, enhancing vehicle choice and tapping into original equipment manufacturer marketing pipelines. These partnerships are viewed by markets as competitive moat-builders, embedding Smartgroup deeper into automotive ecosystems and supporting the thesis of sustainable, above-system growth.

The company has also unveiled a dedicated 2028 sustainability strategy, with commitments around helping customers transition to low-emissions transport and increasing financial and in-kind contributions to community initiatives to 2% of post-tax profits by 2028. While less directly tied to near-term earnings, the strategy strengthens Smartgroup’s ESG credentials, potentially broadening its appeal to screened funds and supporting valuation resilience as the core novated leasing story matures.

Dividends Supportive

From a capital management perspective, Smartgroup has maintained an attractive profile. Recent ordinary dividends of around A$0.34 per share, combined with earnings per share of approximately A$0.90, provide a healthy yield at historical price levels, though the recent rally has compressed the yield somewhat. Net debt remained modest at roughly A$40 million as of June 2025, providing flexibility for continued investment without balance sheet strain.

Broker sentiment has evolved from cautious to increasingly bullish as results have exceeded expectations. Earlier in 2025, some analysts flagged concerns around yield compression despite strong order volumes, but subsequent margin expansion and the FY25 beat have flipped the narrative.

The technical setup, however, is a little more mixed, with an RSI reading approaching 90 statistically rare and often followed by periods of consolidation or mean reversion, even when the underlying fundamental trend remains intact. With shares currently the most overbought on the ASX, there has been minimal let up in the buying, which momentum traders often interpret as confirmation of trend strength, but it also raises the risk of sharp profit-taking or a pause as the stock digests recent gains. The fundamental backdrop has improved, along with bullish sentiment, yet a period of cooling off in a rally can be considered healthy as part of a larger bull trend.