Some of the most attractive ASX shares on the stock exchange could be ones that have lower valuations. Value investors could love the two cheap ASX shares in this article.
Businesses with low price/earnings ratios (P/E ratios) don't have much long-term growth expectation built into them. They can also offer above-average dividend yields, depending on the dividend payout ratio.
With that in mind, here are two cheap ASX share ideas:
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Shaver Shop Group Ltd (ASX: SSG)
Shaver Shop is an ASX retail share that sells male and female personal grooming products and wants to be the market leader in all things related to hair removal. There are currently more than 120 stores around Australia and New Zealand. It also sells other retail products relating to oral care, hair care, massage, air treatment and beauty categories.
Despite all of the lockdowns in the first half of FY22, the company managed to achieve impressive online sales growth to make up for it. In FY22 to 7 November 2021, total sales only fell 0.9% with total online sales jumping 58.6% year on year. It was a 329.4% improvement against FY20. In FY21, it fulfilled 2.4 million customer transactions.
The company has a number of different growth plans including growing the number of returning customers, growing its brand awareness, expanding into new categories, opening new stores and driving operational efficiency. The company is proud of its customer satisfaction, with a net promoter score (NPS) of 89.1 out of 100.
The cheap ASX share is currently rated as a buy by Ord Minnett, with a price target of $1.25. On the broker's projected FY22 numbers, the Shaver Shop share price is valued at 9x FY22's estimated earnings with a grossed-up dividend yield of 10%.
Bapcor Ltd (ASX: BAP)
Bapcor is an auto parts business that is the leading player in the sector, with a number of different brands like Autobarn, Burson, Truckline and Midas.
The business just reported its FY22 half-year result which showed "solid financial performance" including continued revenue growth despite all of the impacts of the lockdowns during the period. The opening up of Melbourne and Sydney led to the second quarter revenue increasing materially compared to the first quarter of FY22.
In summary, Bapcor reported that HY22 revenue grew by 1.9% to $900.1 million and net profit after tax (NPAT) rose 14.7% to $57.7 million. The interim dividend was grown by 11.1% to 10 cents per share.
It has plans to grow in a number of areas. One tactic is to grow its store networks across Australia and New Zealand. It's planning to become more efficient with its distribution centres. Bapcor wants to expand in Asia with both Tye Soon and building its own Burson network in Asia.
The cheap ASX share also wants to 'realise' operational efficiencies and expand its own brand product range (which has a higher gross profit margin).
Ord Minnett rates the company as a buy, with a price target of $8.60. Ord Minnett is expecting the auto parts business to be able to achieve stronger margins and good growth in Asia over time.
On the broker's numbers for FY22, the Bapcor share price is valued at 18x FY22's estimated earnings with a grossed-up dividend yield of 4.4%.
