October could be a good month to look at ASX shares that have been beaten up in recent times.
The share market is going to be volatile, that’s why it is seen as one of the higher-risk assets. But individual shares can move around a lot more, sometimes downwards quite significantly. This may open up opportunities for investors who believe they see good value.
These two businesses could be ones to consider after significant falls:
Kogan.com Ltd (ASX: KGN)
The Kogan share price is down 17.5% since 23 August 2021 and it has fallen 44% from the start of 2021.
FY21 certainly saw a lot of disruption caused by having too much inventory and sales not being as strong in the second half of the year as expected. That’s why net profit after tax (NPAT) ended up being down 86.8% to $3.5 million, reflecting one-off inventory, logistics and Mighty Ape acquisition costs.
However, the FY21 result wasn’t all bad for the ASX share, with some positive signs. Kogan active customers increased 46.9% to 3.2 million, gross sales rose 52.7% to $1.18 billion and gross profit rose 61% to $203.7 million. Adjusted net profit, which removes a number of those non-cash and one-off items, rose 43.2% to $42.9 million.
Prior to the second half of FY21, Kogan had been demonstrating operating leverage with steadily growing profit margins as the business benefited from the scale benefits of being an e-commerce business. Those benefits may be shown again in the future, as Kogan adds more customers, generates more gross profit and expands in New Zealand (with Mighty Ape).
Kogan could benefit over time from the steady growth of products being bought online.
According to Commsec, the current Kogan share price is valued at 26x FY23’s estimated earnings.
BHP Group Ltd (ASX: BHP)
Over the last two months, the BHP share price has fallen by 31%. Commodity businesses go through cycles where the price of the commodity is sometimes priced highly and sometimes drops substantially.
That’s what has happened with the iron ore price – it has dropped by around half since the peak a few months ago.
But the bottom of the cycle could prove to be an opportunity for investors to consider. Macquarie Group Ltd (ASX: MQG) currently rates the BHP share price as a buy with a price target of $56. The prices of BHP’s other commodities are one of the reasons that the broker likes BHP.
Some of the ASX share’s other resources includes coal, oil, copper and nickel.
The broker thinks that BHP shares are valued at 8x FY22’s estimated earnings with a potential grossed-up dividend yield of 14%.
BHP also points to potash as a commodity that could help profit in the future with its long life Jansen asset that should see reliable and growing demand, as well as strong earnings before interest, tax, depreciation and amortisation (EBITDA) margins.