I think that there are some S&P/ASX 200 Index (ASX: XJO) shares that could be really good value.
There are some shares that may look cheap like Australia and New Zealand Banking Group (ASX: ANZ), but I'm not sure how much growth potential they have.
Whereas I think there are some businesses that look really good value but also have good long-term growth potential:
Brickworks Limited (ASX: BKW)
Brickworks is a leading building products business in Australia. It's the market leader for bricks in the country. It sells a variety of other products including masonry, paving, roofing, precast and so on.
Things are currently difficult with construction due to COVID-19 impacts. However, I don't think the tough conditions will last forever. I believe the best time to buy a cyclical business is near the bottom of the cycle. This could actually make it a good time to buy with regards to its construction earnings.
The ASX share also recently made some acquisitions in the US which made it into the market leader in the north east of the US. The company plans to bring its Australian efficiencies to the American subsidiary. This should improve its profit margins over the coming years.
What I particularly like about Brickworks is its defensive investments. It owns around 40% of investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). The ASX share has been around for over a century and its owns a broad portfolio of different industries including telecommunications, resources and listed investment companies (LICs).
Brickworks also owns a 50% stake of an industrial property trust along with partners Goodman Group (ASX: GMG). This property trust leases to quality tenants and it's exposed to the growth trends of ecommerce and logistics.
The value of the Soul Patts shares and the stake of the property trust alone supported the value of Brickworks' market capitalisation. We get the rest of the business for free.
At the current Brickworks share price it offers a grossed-up dividend yield of 4.7%. It hasn't cut its dividend in four decades.
A2 Milk Company Ltd (ASX: A2M)
I think that A2 Milk is a great ASX 200 growth share. It sells a variety of dairy products, though the high margin infant formula is the key for the business.
It sells an enormous amount of infant formula overseas. In FY20 the company grew its China label infant nutrition by over 100% to NZ$337.7 million. In the USA it grew its revenue by 91.2% to NZ$66.1 million.
The A2 Milk growth runway is really long in my opinion. The ASX share is steadily growing its market share overseas. It's investing for that growth, but I think it's worth it. Scale does help with a consumer business.
In Canada the company has recently entered into an exclusive licensing agreement with Agrifoods to produce, distribute, sell and advertise A2 Milk branded liquid milk in the Canadian market. The product has recently been launched to customers in Western Canada.
Since listing on the ASX, this share has done incredibly well. FY21 is expected to show continued strong revenue growth. However, the earnings before interest, tax, depreciation and amortisation (EBITDA) margin is expected to be lower in FY21 due to higher raw and packaging costs, more marketing and pantry-stocking not likely to be replicated. The share price has dropped back since reporting season – I think it's a good time to buy.
At the current A2 Milk share price it's trading at 27x FY22's estimated earnings.
Foolish takeaway
I think both of these ASX shares are really good value right now. Using Brickworks' book value, it looks like a good time to buy. A2 Milk is a great ASX growth share and it's trading much cheaper than many of its growth stock peers. If you don't need income then I think A2 Milk could be the best pick in the ASX 200.
