Are these ASX shares too cheap to ignore?

Are Kogan.com Ltd (ASX:KGN) and two other shares too cheap to ignore?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

October certainly was a tough month for investors with a lot of shares being heavily sold off.

This has left many trading on lower than average earnings multiples. Are they too cheap to ignore?

Adairs Ltd (ASX: ADH)

This home furnishings retailer's shares may have stormed 10% higher on Thursday, but they are still down over 24% since this time last month. I suspect that concerns over a weakening housing market have weighed on its shares. However, I think this selloff was unnecessary. Especially given the low multiples its shares already traded on and the fact management recently reiterated its guidance for sales and profit growth of up to 14.3% and 13.7% respectively in FY 2019. So, with its shares trading at 10.5x earnings and providing a generous dividend yield, I think Adairs is a great option for investors.

Kogan.com Ltd (ASX: KGN)

A surprisingly bad trading update from this ecommerce company last week has led to the Kogan.com share price being hammered. So much so, they are now trading 72% lower than their 52-week high. This decline means that its shares are changing hands at 21x earnings and offer a trailing fully franked 4.6% dividend. While this could prove to be an absolute bargain buy, I would suggest investors wait and see if management adds more colour to its trading update at its annual general meeting in two weeks.

Reject Shop Ltd (ASX: TRS)

After more than halving in value since this time last month, this discount retailer's shares are currently priced at just 4x earnings. That selloff was triggered by a disappointing trading update which revealed a sudden deterioration in comparable store sales and a ~40% downgrade to its first half earnings expectations. Management blamed the lack of real wage growth and the increase in basic expenses for the poor performance. I suspect the growing presence of Aldi could also be impacting its performance. Overall, while 4x earnings is dirt cheap, I'm concerned that this could be a value trap.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Kogan.com ltd and The Reject Shop Limited. 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.

More on Cheap Shares

Couple at an airport waiting for their flight.
Cheap Shares

Is Qantas a bargain ASX 200 stock today?

Analysts at Goldman Sachs think the Flying Kangaroo could be dirt cheap.

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Cheap Shares

1 secretly cheap ASX 200 stock I'm buying for the long run

The best performer on the index last year has had a poor start to 2024. Let's examine whether this is…

Read more »

A young woman sits on her bed holding a cup of coffee inside her recreational vehicle hired through the Camplify website
Cheap Shares

3 struggling ASX shares to buy at a discount

These stocks are down temporarily because of temporary issues. This could be a golden opportunity to buy cheap.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Cheap Shares

2 'materially undervalued' ASX 200 shares to buy while they're at 'attractive value'

Is there a better feeling in investing than grabbing stocks for cheap then watching while everyone else catches on to…

Read more »

Five happy young friends on the coast, dabbing and raising their arms in the air.
Cheap Shares

5 oversold ASX shares to buy in March 2024

Will you get 'em while they're cheap?

Read more »

Rocket takes off from the hand of a businessman.
Cheap Shares

11% yield? 2 strikingly cheap ASX shares 'primed for recovery'

Discounted stocks are sometimes a value trap, but experts reckon this pair is ready to soar again.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Cheap Shares

1 top ASX bargain stock that's ready for a bull run!

The market savaged these shares during reporting season, but multiple experts are bullish for the years to come.

Read more »

Three young women on holidays smile at they look at a map.
Cheap Shares

Long-term investing: 3 top ASX stocks you can buy for under $20 a share

These shares don't cost the earth to add to the portfolio, but all represent businesses going places.

Read more »