March 2022 could be a good month to go hunting for cheap ASX shares with low price/earnings ratios (p/e ratios) according to the experts.
Businesses can trade at very different valuations. Some have market capitalisations that are around 10x the net profit. Some others are priced at 100x the profit, or more.
Often, those highly-priced businesses have a lot of growth expectations built-in. But it's possible that the lower-priced ones can surprise the market. But low p/e shares can also disappoint as well. But experts have found these two which look like opportunities:
Shaver Shop Group Ltd (ASX: SSG)
The Shaver Shop share price is rated as a buy by the broker Ord Minnett with a price target of $1.30. That implies a potential double-digit capital growth return over the next 12 months.
It's a retailer of a wide range of grooming products for men and women. The ASX share is also expanding into other personal care categories like oral care.
The first half of FY22 suffered from store closures, leading to a profit decline of 8.6%, though sales actually increased by 2.8%. Online sales grew 37.2% to $51.6 million. The interim dividend from the cheap ASX share was grown by 40.6% to 4.5 cents per share.
The Shaver Shop share price is valued at 9x FY22's estimated earnings with a projected grossed-up dividend yield of 11% according to Ord Minnett.
In the second half to date to 17 February 2022, the total sales were up 6.2% thanks to more online sales. Management says that the business is in a "very strong" position. Shaver Shop says that it's the market leader across ANZ in the growing personal care and grooming segment. It benefits from exclusive access to many of the latest new product launches.
New customers, who shopped during COVID-19, can be converted into loyal, repeat customers that shop with all their personal grooming needs.
Bapcor Ltd (ASX: BAP)
Bapcor is an auto parts business with a number of different brands such as Burson, Autobarn, Tuckline, ABS and Midas.
The Bapcor share price has seen a lot of volatility over the last two years. Cars are back on the road again, but it is down 20% after telling the market that its boss, Darryl Abotomey, was leaving the business earlier than expected after falling out with the board.
However, the cheap ASX share is still focused on growth. It wants to grow its overall network of locations, adding hundreds of outlets over the next few years. The ASX share also has growth aspirations for south east Asia – it has a small Burson network, but it also owns 25% of Tye Soon – a business with operations in multiple Asian countries.
The second half of FY22 is expected to be stronger year on year with no more lockdowns and Omicron impacts softening.
Bapcor is also aiming to be more efficient and sell more products online.
It's currently rated as a buy by UBS, with a price target of $8.10. It values the Bapcor share price at 17x FY22's estimated earnings and a grossed-up dividend yield of 4.1%.
