Got cash to invest? Here are 2 ASX shares that could be buys

Kogan and Sonic Healthcare could be good ASX shares to think about.

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Investors with cash may want to consider some ASX shares that have longer-term growth potential.

The below two businesses have grown considerably over the last two years, but they may have more growth potential over the coming years:

Sonic Healthcare Ltd (ASX: SHL)

Sonic is a large, global business that’s involved in pathology, diagnostic imaging and radiology as well as general practice medicine and corporate medical services.

In the first half of FY21, it saw elevated revenue growth of 33% to $4.4 billion. Profit measures grew even faster. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 89% to $1.3 billion and net profit increased 166% to $678 million. This profit growth occurred thanks to the operating leverage of using existing facilities.

Whilst the global base business was flat, it was the millions of COVID-19 tests that drove revenue and earnings higher. Whilst COVID-19 immunity testing could see potential growth, there is another wave of COVID-19 as the Delta strain spreads across the world which is causing renewed testing volumes.

Sonic Healthcare also recently announced that it was acquiring Canberra Imaging Group (CIG). This will boost the ASX share’s imaging Australian revenue by approximately 10% and offer potential synergy benefits.

CIG has annual revenue of around $60 million and is the leading radiology practice in Canberra.

Settlement of the transaction is expected in the first quarter of FY22. It will be funded from cash and/or available debt and will immediately add to earnings per share (EPS). Ltd (ASX: KGN)

Kogan has a number of retail offerings and services. Not only does it sell a wide array of products on its main website such as TVs, phones, computers, appliances, heating, cooling, furniture, office supplies and so on, it also has other services including mobile, internet, insurance, superannuation, energy and so on.

The e-commerce business also owns a couple of businesses it has acquired like furniture business Matt Blatt and New Zealand online retailer Mighty Ape.

Kogan’s share price has dropped around 34% since the start of the 2021 calendar year.

There has been demurrage costs impacting its profit in FY21. The company recently explained that a key challenge caused by COVID-19 has been managing inventory levels to support its growth. It built up its inventory position in late 2020, causing high warehousing costs that are continuing.

The ASX share has been optimising its inventory to reflect the current market conditions by increasing promotional activity, which has led to near-term gross margin and higher near-term marketing costs. Kogan is expecting to return to normal inventory levels (relative to the size of the business) and marketing spending as the inventory is reduced.

Before these inventory problems, Kogan had been experiencing steadily increasing profit margins at different profit margin lines of the business.

In the company’s outlook update, Kogan said:

The longer term fundamentals for remain very attractive given the company’s position in the Australian and New Zealand online retail markets, and with online retail sales currently only accounting for a small percentage of total retail sales in Australia and New Zealand.

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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 ltd. The Motley Fool Australia owns shares of and has recommended ltd. The Motley Fool Australia has recommended Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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