3 ASX shares going for way cheaper than they're worth: Wilsons

There's still plenty of turmoil left this year for growth shares, say these experts, but 3 stocks still look well-placed in the long run.

| More on:
A young woman sits on her lounge looking pleasantly surprised at what she's seeing on her laptop screen as she reads about the South32 share price

Image source Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Growth shares are very much out of favour at the moment, with some technology stocks halving the past few months.

The team at Wilsons Advisory admitted the immediate outlook for growth shares is still not great.

"With bond yields continuing their upward climb during March, the environment for growth stocks still presents a headwind in the short-term," read its recent memo to clients.

"It may not be until mid-year when greater clarity emerges on both the pace and ultimate level of interest rates in the US."

But long-term investors know that if you have businesses that have structural drivers for growth then it will overcome short-term macro-economic factors like inflation and wars.

"Our view remains that over the medium to long-term, if companies can grow their earnings above market, share prices will follow."

As such, the Wilsons analysts presented their case for why they love 3 particular ASX shares that are taking up 11% of the Wilsons Australian Equity Focus List.

'Long-term structural growth qualities' will win in the end

The team stated it currently has a "positive stance" on Aristocrat Leisure Limited (ASX: ALL), James Hardie Industries PLC (ASX: JHX) and Seek Limited (ASX: SEK).

The memo showed how all 3 stocks have had their prices slashed more than the MSCI Australia Growth index, indicating a discount to the general market.

"In our view, all 3 companies provide long-term structural growth qualities which are presently being discounted by the market," stated the team.

"We still believe they can grow earnings well ahead of the market over the next 3 years."

The big catalyst for gaming provider Aristocrat is expected to be the release of its first-half results on 19 May.

"Near-term growth could be closer to +25% as land-based gaming continues to rebound," the Wilsons memo read.

"Currently trading on a PE multiple of 21x, Aristocrat does not seem expensive relative to its earnings growth potential."

With rising interest rates, many investors think that building materials provider James Hardie will suffer from a downturn in housing construction.

But Wilsons analysts disagree.

"We believe the James Hardies' growth is less dependent on the housing cycle than many believe given; 1) proven ability to grow through the cycle; 2) emerging B2C proposition, and 3) EU assets are much earlier in their lifecycle."

The team noted that the James Hardie share price is currently trading at 10% below the industrials index, even though its 10-year average is 40% above it.

As for jobs classifieds site Seek, Wilsons analysts think that the share price could exceed $40 if the company can successfully execute its plans.

That's more than a 30% premium on the current level.

"We think the market is still too focused on ad volumes, as distinct from revenue – which should hold up better than volumes as SEK continues on value-based pricing and removal of the recruiter fee discount," read the memo.

"We believe the market is likely to underestimate the benefit from the switch to value-based pricing, much like it did with Carsales.com Ltd (ASX: CAR) and REA Group Limited (ASX: REA)."

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited, SEEK Limited, and carsales.com Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Growth Shares

a happy investor with a wide smile points to a graph that shows an upward trending share price
Growth Shares

Here are the top five ASX 200 shares in Macquarie's model growth portfolio

These ASX 200 shares are highly rated by analysts at Macquarie.

Read more »

a man with a wide, eager smile on his face holds up three fingers.
Growth Shares

3 ASX shares to buy in 2024 and hold for the next 10 years

Analysts think these top shares are in the buy zone right now.

Read more »

A man leans forward over his phone in his hands with a satisfied smirk on his face although he has just learned something pleasing or received some satisfying news.
Growth Shares

4 ASX growth shares I think will benefit from interest rate cuts in 2024

Not only will home loan holders rejoice, investors of these stocks could also be yelling with joy when the Reserve…

Read more »

A smiling woman sits in a cafe reading a story on her phone about Rio Tinto and drinking a coffee with a laptop open in front of her.
Growth Shares

3 of the best ASX growth shares to buy now

Analysts see plenty of upside for these buy-rated shares.

Read more »

A man and woman in an office look at a laptop and discuss investing, budget strategies or other financial concepts
Growth Shares

Here's why analysts love these buy-rated ASX 200 growth shares

There's a reason analysts are feeling bullish about these companies.

Read more »

A woman with strawberry blonde hair has a huge smile on her face and fist pumps the air having seen good news on her phone.
Growth Shares

Big returns could be coming for high-flying Lovisa shares

Morgans doesn't believe it is too late to snap up this hot stock.

Read more »

Smiling young parents with their daughter dream of success.
Growth Shares

Why these ASX 200 growth shares could be top buys now

Analysts are feeling bullish about these growth stocks. Let’s see what they’re saying.

Read more »

Concept image of a man in a suit with his chest on fire.
Growth Shares

Ignore the noise and buy this hot ASX growth stock

A recent pullback may have created a buying opportunity according to Bell Potter.

Read more »