MENU

Why I would avoid these cheap ASX shares at all costs

Due to sizeable declines in their respective share prices, a number of ASX shares appear to be changing hands at very cheap prices at the moment.

However, although these shares look cheap, it doesn’t necessarily mean that all of them are good value. Here’s why I wouldn’t be in a rush to buy these two:

iSentia Group Ltd (ASX: ISD)

It wasn’t that long ago that iSentia was a market darling and could do no wrong. But that all changed in FY 2017 when the media monitoring company looked to expand its business into the growing content marketing industry. The acquisition of King Content was nothing short of a disaster and things have gone downhill since then. This includes its share price which has fallen over 50% in the last 12 months.

Although the King Content business has now been disbanded, the company’s core business has begun to struggle due to revenue pressures from higher levels of customer churn. In light of this, EBITDA is expected to decline 22% in FY 2018. This will be the second year in a row of such declines after EBITDA sank 21% lower in FY 2017.

Myer Holdings Ltd (ASX: MYR)

The Myer share price has lost 52% of its value over the last 12 months after its multi-year turnaround plan failed to make any noticeable difference to its disastrous performance. Unfortunately, I don’t believe the plan will ultimately lead to much of an improvement due to the lack of relevance the retailer has with consumers these days.

Department stores are arguably a relic of a previous retail age and have been replaced with shopping centres and online retail stores like Amazon and Kogan.com Ltd (ASX: KGN). So although Myer’s shares look cheap at under 8x trailing earnings, I wouldn’t risk buying the shares of a retailer that may not exist in a few years.

Overall, I would suggest investors avoid iSentia and Myer shares and consider one of these fast-growing blue chip shares instead.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended iSentia Group Ltd and Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.