I’m a big fan of popular tech shares Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX) and believe their strong long-term growth potential justifies the premium their shares trade at today. However, I can understand why some investors with a lower tolerance for risk would not be comfortable with this premium. So, for those investors, here are three shares that I think look cheap at current levels: Adairs Ltd (ASX: ADH) This homewares retailer’s shares are currently changing hands at just 10x trailing earnings. I think this makes them dirt cheap given its solid start to FY 2019 in…
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However, I can understand why some investors with a lower tolerance for risk would not be comfortable with this premium.
So, for those investors, here are three shares that I think look cheap at current levels:
Adairs Ltd (ASX: ADH)
This homewares retailer’s shares are currently changing hands at just 10x trailing earnings. I think this makes them dirt cheap given its solid start to FY 2019 in spite of the housing market weakness. In February Adairs posted a 10.6% increase in half year sales to $164.4 million and a 9.1% lift in net profit after tax to $14.9 million. This solid half was driven by strong online sales growth and a 7.3% increase in like-for-like sales. Pleasingly, during the first seven weeks of the second half like-for-like sales were up 7.1%. I believe this has positioned it well to deliver a solid full year result in FY 2019. Another bonus is that its shares provide a trailing fully franked 7.7% dividend yield.
Helloworld Travel Ltd (ASX: HLO)
Helloworld is an integrated travel company which I believe is trading at a very attractive level given its current growth profile. Its shares were sold off after it was caught up in a political scandal last month, leaving them trading at 16x trailing earnings. I feel this is cheap considering management expects to deliver full year EBITDA growth of between 16.5% to 22.7% in FY 2019.
Super Retail Group Ltd (ASX: SUL)
Another retail share which is trading at a level which I believe is dirt cheap is the company behind brands such as Macpac, Rebel, and Super Cheap Auto. At present its shares are changing hands at 10.5x trailing earnings despite it delivering a solid 8.9% increase in half year normalised net profit after tax to $81.6 million last month. And as with Adairs, the company has had a strong start to FY 2019, reporting like for like sales growth of 4% for the first six weeks of the second half. Its shares also provide an above average fully franked dividend yield of 6.4% on a trailing basis.
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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 Altium, Appen Ltd, Helloworld Limited, and Super Retail Group 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.