Should you buy these beaten down ASX shares?

With volatility returning to the Australian share market in recent days and dragging it notably lower, it will come as no surprise to learn that a large number of shares are currently trading at 52-week lows.

Three that caught my eye are listed below. Is it time to invest in these beaten down shares?

The DuluxGroup Limited (ASX: DLX) share price touched a 52-week low of $6.82 today. The paints company’s shares have come under pressure this month after the release of its full year results. Dulux posted a 5.4% increase in net profit after tax to $150.7 million and advised that it expects further growth in FY 2019 despite the cooling housing market. While on the surface this looks like a decent result, it is worth noting that its profit growth was boosted by one-off asset sales, lower depreciation, and net interest expense. Given its current growth profile and the fact that its shares are priced at almost 18x earnings, it would have to drift a fair bit lower before I’d consider it good value.

The Harvey Norman Holdings Limited (ASX: HVN) share price has continued its poor run and hit a 52-week low of $2.99 on Monday. The retailer’s shares have now shed 28% of their value since the start of the year. Concerns over increasing competition from online competitors such as Ltd (ASX: KGN) and Amazon and the slowdown in the housing market have weighed heavily on its shares this year. At just 10x estimated forward earnings its shares do look reasonably cheap now, but I do have concerns that Harvey Norman’s shares could ultimately prove to be a value trap. I intend to hold back from making an investment until there are signs that the retailer will deliver consistent profit growth.

The Medibank Private Ltd (ASX: MPL) share price dropped to a 52-week low of $2.44 today. The private health insurer has come under pressure over the last few months due to concerns over a soft full year result, its mixed outlook, and regulatory uncertainty. In addition to this, the company recently announced the surprise loss of a contract with the Australian Defence Force. While I think Medibank Private’s shares have fallen to an attractive level, I intend to hold out until after the election. I suspect health insurance premiums could be a topic that is raised during the campaign trail.

In the meantime I think these top shares would be far better options for investor right now.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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 Scott Phillips.

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