The two ASX shares in this article could be quality ideas to consider. Brokers have rated the stocks in this article as buys.
Baby Bunting Group Limited (ASX: BBN)
Baby Bunting is an ASX retail share that's liked by multiple brokers.
One of the brokers that likes Baby Bunting is Morgans, which rates Baby Bunting as a buy. The price target for the next 12 months is $6.39.
Morgans thinks that Baby Bunting has multiple growth avenues. The expansion into New Zealand will help the growth of the business for longer.
Despite a higher price/earnings ratio than others in the retail space, the broker thinks that Baby Bunting is worthy of it due to the better growth prospects.
The FY21 half-year result revealed a lot of growth. Total sales of $217.3 million was 16.6% higher than the prior corresponding period. The comparable store sales growth was 15% (or 21.8% excluding Victoria), with total online sales growth of 95.9%.
Baby Bunting's gross profit margin increased 41 basis points, helping pro forma underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grow by 29.7% to $18.5 million and pro forma net profit after tax (NPAT) rose 43.5% to $10.8 million.
The ASX share may be on track to deliver more growth in the second half of FY21 with comparable store sales growth of 18.5% in the first six weeks.
In New Zealand, the business is looking to open at least 10 stores, with the first to be opened in FY22.
Bega Cheese Ltd (ASX: BGA)
Bega Cheese is another ASX share that is liked by multiple brokers, including Morgans.
The broker has a 12-month share price target on Morgans of $6.80.
One of the main reasons that Morgans is positive on the business is the acquisition of Lion Dairy and Drinks. This expanded the business into new branded dairy categories such as yoghurt, white milk and flavoured milk and provides exposure to new dairy regions across the country.
Both Bega management and the broker are expecting to unlock significant synergies from the acquisition.
Executive Chair Barry Irvin said:
The acquisition delivers important industry consolidation and value creation with synergies across the entire supply chain. The expanded product range, manufacturing and distribution infrastructure and brand portfolio realises our ambition of creating a truly great Australian food company.
Bega said that the acquisition provides a platform for further growth in international markets and provides a market presence to support innovation.
The ASX share's FY21 half-year result showed a lot of growth, particularly in the bulk segment, though COVID-19 impacts on the infant formula category were a negative.
Half-year normalised earnings before interest and tax (EBIT) went up 79% to $48 million and normalised profit after tax grew 98% to $29.7 million. Statutory earnings per share (EPS) rose by 141% to 9.6 cents.
According to Morgans, the Bega Cheese share price is valued at 22x FY22's estimated earnings with an expected FY21 grossed-up dividend yield of 2.2%.
