The S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO) soared on Wednesday despite continued COVID-19 woes in Victoria and New South Wales. The market remains in a vulnerable state which may present bargain opportunities over the coming weeks or months. Here are two ASX shares I would love to get a hold of at cheaper prices.
1. Electro Optic Systems Holdings Ltd (ASX: EOS)
EOS is a leading space and defence player with products and technologies spanning laser, electronics, optronics, telescopes, beam directors and precision mechanisms. The company announced back in April that its pipeline expectations amidst COVID-19 remain unchanged, with increased momentum of acquisition activity in key customer programs. The timing of revenue remains a challenge as $70 million of export revenue and $9 million of EBIT has been deferred relating to contracts with assumed disruption to delivery and payment.
I believe space and defence are consistent sectors with large clients and which are often backed by significant government projects. On 3 July, EOS announced that it had entered into contract negotiations with the Commonwealth of Australia for its 251 Remote Weapon Stations and related materials. This forms part of the Federal Government's $270 billion capability upgrade for the Australian Defence Force, under the new 2020 Force Structure Plan.
In FY19, EOS delivered a 91% increase in revenue driven by customer demand and 194% increase in EBIT. Moving forward, it anticipates FY20 revenues to increase 38% and EBIT to increase 25% on FY19. From a valuation perspective, the company trades at a price-to-earnings (P/E) ratio of approximately 27.9 which I believe is relatively cheap given its growth potential. I feel the company's continues M&A activity and advancements in space and communication systems businesses make it an exciting ASX share to consider buying.
2. Zip Co Ltd (ASX: Z1P)
The Zip Co share price has fallen nearly 20% this week following a significant lift in share prices for all buy now, pay later (BNPL) players over recent months. The company provided a quarterly update on Wednesday with solid figures across the board. Zip Co demonstrated its resilience amid the COVID-19 crisis with transaction values increasing 10% on Q3 and strong credit performance from its customers.
Perhaps more importantly, the company's Quadpay acquisition processed over 1.4 million transactions, up 982% on the same period in 2019. This delivered total transaction volume of US$163 million for the quarter, up 9% QoQ and up 800% YoY. The United States opportunity is very exciting for Zip Co and positions it as a leading ASX growth share. I believe its current market capitalisation and footing in the US market makes it a more reasonable buy than the likes of Afterpay Ltd (ASX: APT).
