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Should you buy these beaten down ASX shares?

The Australian share market may have pushed notably higher over the last couple of months, but not all shares have been so fortunate.

The three companies listed below have all seen their respective share prices come under pressure in recent times. Is it time to snap them up?

Baby Bunting Group Ltd (ASX: BBN)

This baby products retailer’s shares have fallen 14% since this time last year after it was negatively impacted by the clearance sales of closing competitors. I think that this selloff has created a buying opportunity for investors. Once these short term headwinds ease, I expect Baby Bunting will gobble up the vacated market share. Furthermore, I believe that as competition lessens, Baby Bunting will have more power when negotiating with distributors. So not only could the company see sales increase from a greater share of the market, but margins could be wider as well.

Bellamy’s Australia Ltd (ASX: BAL)

Last week this organic infant formula company’s shares fell over 15% after the release of a softer than expected sales update from rival A2 Milk Company Ltd (ASX: A2M). While it may be best to wait for the dust to settle before snapping up shares, I do think that Bellamy’s is an attractive long-term investment at the current price. While it shares do still trade at a significant premium to the market average, I believe price increases and strong demand in China will allow it to grow earnings at a rate that justifies this. However, it is worth noting that a failure to live up to expectations could lead to a sizeable share price decline like we saw last week with a2 Milk Company.

InvoCare Limited (ASX: IVC)

This leading funeral company has seen its share price tumble almost 23% since the start of the year. The surprise fall from grace from a UK peer, Dignity, following a price war appears to have been one of the main catalysts for InvoCare’s decline this year. This has left many concerned that one could happen in Australia, though so far there are no signs of it happening. In addition to this, an earnings downgrade, potential loss of market share, and its reasonably expensive shares have weighed heavily on its share price performance. I still think it is expensive at 22x estimated full-year earnings for its short to medium term growth profile and would suggest investors stay clear for the time being.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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 Scott Phillips.

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