Are these 2 industry-leading ASX shares too good to ignore and now buys?

Bapcor is one of the industry leaders in Australia and New Zealand.

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Key points

  • Altium and Bapcor are both seen as industry leaders, but are these ASX shares buys?
  • Bapcor is the automotive parts experts with multiple brands. However, it recently lost its boss
  • Altium is a global leader in the electronics PCB design world. But, the business is getting caught up in the tech sell-off

There are some strong ASX shares that are leaders in the industries that they work in.

Sometimes it can be a bit difficult to know which business is the sector leader. But others can point to much larger market shares like REA Group Limited (ASX: REA) and Telstra Corporation Ltd (ASX: TLS).

It can also be telling which business is improving its competitive position when it comes to the direction of the company’s market share or customer preference. Is that strength growing?

The below two ASX shares are industry leaders. Are they buys?

Bapcor Ltd (ASX: BAP)

Bapcor describes itself as Australasia’s premier provider of automotive aftermarket parts, accessories, automotive equipment, and services in trade, retail, wholesaling and so on.

Some businesses it operates includes Burson Auto Parts, Autobarn, Autopro, BNT, Truckline and Midas.

Over the past two months the Bapcor share price has fallen by 16.5%.

Two months ago, investors learned that the retirement of CEO and managing director Darryl Abotomey was being accelerated because of a marked deterioration in the relationship between the board and Mr Abotomey, making his position untenable.

The ASX share’s board said that the leadership transition would enable Bapcor to install a more contemporary leadership and management approach to drive the company’s growth while also ensuring consistency with changing stakeholders’ expectations, an appropriate governance and oversight framework remains in place.

The Bapcor share price is currently rated as a buy by the broker Credit Suisse. This broker thinks the decline is an opportunity, though the loss of Mr Abotomey does reduce the fair value of the business. But it thinks Bapcor can go through a recovery.

Credit Suisse puts Bapcor shares at 18x FY22’s estimated earnings. Bapcor is planning to add hundreds of more outlets across its different brands over the next few years to grow its scale, whilst also becoming more efficient. It also has plans to keep growing in Asia through its Burson network and the Tye Soon investment.

Altium Limited (ASX: ALU)

Altium is one of the world leaders when it comes to electronic PCB design. It also has other divisions including the electronic part search engine business called Octopart.

The business has been a takeover target in the past year, but it then went on to an even higher share price. However, Altium has been caught up in the recent tech sell-off – it’s down 15% this year, which is only three weeks old.

This ASX share is benefiting from the growth of the internet of things, where there is a large rise in the number of ‘intelligent’ products and the wide increase of electronics. That trend is being accelerated by 5G and edge computing.

A key part of the company’s planned growth is Altium 365, its cloud software platform. It’s benefiting from those electronic growth trends.

Altium is targeting $500 million of revenue in the next few years, whilst also looking to grow profit margins. In FY22, it’s expecting to grow revenue by 16% to 20% whilst increasing annualised recurring revenue (ARR) by 23% to 27%. The first four months of FY22 have been strong “across the entire Altium group”. Octopart is apparently outperforming and Altium 365 adoption is accelerating. China and Nexus are also performing well.

By 2025, it’s expecting to be in a position where it’s transforming the global industry.

Altimade is expected to be launched in the first quarter of 2022, which is being built on top of Altium 365 and incorporates the delivery of a design to realisation experience – the whole process – which has never been seen before in electronics.

Management are confident about the future. The broker Citi rates Altium as a buy, noting the strong performance by Octopart and the compelling future of Altimade. However, the price target is only $35.40, which is 6% lower than where it is today.

Citi thinks the current Altium share price is valued at 64x FY23’s estimated earnings.

Should you invest $1,000 in Altium right now?

Before you consider Altium, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Altium wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Tristan Harrison owns Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Altium. The Motley Fool Australia owns and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended Bapcor and REA Group 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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