Volatility could provide an opportunity to look at ASX shares at lower prices.
Share prices are changing all the time, but a few negative days in a row can make a business much better value quite quickly, if the long-term profit isn’t being hurt as well.
Looking at the market can lead to finding opportunities that are now much better value.
Here are two to consider:
Accent Group Ltd (ASX: AX1)
The Accent share price has fallen 8% over the last week and it’s down 31% since 28 April 2021.
This is a shoe business with a number of stores which sells a large variety of brands. Skechers, Vans, Stylerunner, Glue Store, Pivot, The Athlete’s Store and The Trybe are just some of the names in the portfolio. It recently signed a distribution agreement with Skechers to extend it by another six years to December 2032.
The FY21 result showed what the business is capable of. Total sales increased around 20% to $1.14 billion. Total online sales increased 48.5% to $209.9 million.
But there were a number of profit margin improvements across the ASX share which helped deliver a large amount of profit growth. The gross profit margin increased 30 basis points, rising from 55.8% to 56.1%. This helped earnings before interest and tax (EBIT) rise 32.1% to $124.9 million and earnings per share (EPS) rose 38.2% to 14.2 cents.
This helped the business grow its annual dividend by 21.6% to 11.25 cents per share.
Accent continues to roll out more stores. It opened 90 new stores during the last financial year. Including the acquisition of Glue Store, its total store number increased to 638. New stores continue to perform better than older stores on more favourable rents.
It’s expecting to reach 700 stores in FY22, opening at least 65 new stores across all banners. Store growth in New Zealand continues to be a key focus. It currently has 75 stores in New Zealand and it’s targeting more than 100 stores by December 2023.
However, lockdowns are expected to hurt EBIT by at least $15 million, though it has implemented a range of inventory management and cost reduction initiatives. Store sales are obviously suffering, but digital sales continue to grow strongly.
According to Commsec, the Accent share price is now valued at 12x FY23’s estimated earnings. The projected FY23 grossed-up dividend yield is 8.5%.
Mineral Resources Limited (ASX: MIN)
The Mineral Resources share price is down 15% in a week and down almost 30% since the end of July 2021.
This ASX share generates a lot of profit from its iron ore operations, so investors may be focused on the impact of the falling iron ore price.
However, Citi notes that the company’s exposure to lithium may be able to limit the damage done by the weaker iron ore price. That’s one of the main reasons why the broker rates Mineral Resources as a buy with a price target of $65 for the next 12 months.
Including the expected profit decline, the Mineral Resources share price is valued at 12x Citi’s projection for FY23’s earnings with a projected grossed-up dividend yield of around 6% in that year.
In FY21 iron ore was still strong, which helped grow underlying net profit by 230% to $1.1 billion and the annual dividend soared 175% to $2.75 per share.