2 compelling ASX shares that could be buys in June 2021

Lovisa and Kogan could be two interesting ASX shares to think about this month.

| More on:
A happy shopper with lots of bright shopping bags, indicating a positive surge for ASX retail share price

Image source: Getty Images

There are some really intriguing ASX shares out there that might be worth looking into right now.

Businesses that are growing and have longer-term growth plans might be able to produce attractive profit growth over time.

Here are two names to think about:

Lovisa Holdings Ltd (ASX: LOV)

Lovisa is a business that’s currently rated as a buy by the broker Morgans with a price target of $17.95. That suggests a potential increase of over 20% during the next 12 months.

This business is about providing fashionable jewellery at affordable prices. It says that it introduces 150 new styles to stores each week. It’s currently operating in 15 countries.

COVID-19 has heavily affected trading over the last 15 months. The FY21 half-year result saw revenue drop 9.8% to $146.9 million and underlying net profit fell 22.6% to $21.5 million.

However, the business was starting to see a turnaround in the second half of FY21. Lovisa is steadily opening new stores, particularly in the huge market of the US.

Digital growth is an important part of the company’s plans – it saw 335% online growth in the first half of FY21 and wants to keep capitalising on this.

Lovisa has a “strong” balance sheet with cash and debt that can be used to support its global expansion. It has a very quick payback time for each new store that is opened and fully operational.

The broker believes that Lovisa is a good ‘opening up’ investment option, but it also offers good growth potential thanks to the acquisition of the European business called Beeline which it is looking to expand.

However, local restrictions continue to impact stores in certain locations like Victoria and Germany.

Kogan.com Ltd (ASX: KGN)

Kogan is another ASX share that is being disrupted by COVID-19 impacts. It benefited from the COVID-19 boom of online sales.

But now it’s suffering from slower demand as well as excessive inventory. Kogan has also been hit with demurrage costs.

However, prior to these recent issues, management could point to multiple years of growing margins such as the earnings before interest, tax, depreciation and amortisation (EBITDA) margin.

The business may not be able to report another half-year of growth in a couple of months, but Kogan is expecting to turn things around and achieve longer-term growth.

Kogan is expecting short-term profit margins to be impacted as it aims to return to normal inventory levels with elevated marketing initiatives. It’s now expecting FY21 adjusted EBITDA to be in a range of $58 million to $63 million.

The ASX share said about its outlook:

The board looks to the future with confidence as the business has invested in key strategic initiatives and has a strong level of in-demand inventory heading into the first half of FY22 while observing price inflation through global supply chains. The initiatives that the company has put in place to address the rapid scaling of a large e-commerce company are expected to drive continuous customer experience improvements in FY22. The company has learnt valuable lessons over the last few months, including many key strategies on how to better scale operations of a large fast-growing e-commerce company.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Growth Shares