Many high-quality ASX shares have been beaten up in 2022. Are they now opportunities?
Investors have a lot to contend with right now. There's a war going on in Ukraine. Inflation is high. Interest rates are expected to go higher.
Share prices change all the time. Sometimes valuations can change significantly in a short amount of time. But is it now time to jump on these stocks?
REA Group Limited (ASX: REA)
The REA Group share price has fallen almost 20% in 2022.
REA Group is recovering from the impacts of COVID-19 when property volumes were down. In the first half of FY22, it saw core revenue rise by 37% to $590 million, with core net profit after tax (NPAT) jumping 31% to $226 million. These numbers were achieved despite the lockdowns in Melbourne and Sydney in the first quarter.
The CEO said that the removal of COVID restrictions saw a wave of new listings on realestate.com.au, with sellers making up for the time lost in lockdown and taking advantage of the significant buyer demand. There was also record take-up of its premium listing products in its residential and commercial divisions.
REA Group's international divisions also performed. REA India saw revenue growth of 125% to $24 million.
In terms of the outlook, the ASX share said that residential property market conditions remain positive. January 2022 national residential new listings were up 14% year on year, with Sydney listings up 19%.
However, the year-on-year growth rate is expected to slow in the second half as the market cycles through very strong listing volumes in the prior period.
Morgan Stanley rates the business as a buy, with a price target of $178. That's almost 30% higher. It thinks the outlook is still positive for the business.
Pro Medicus Ltd (ASX: PME)
The Pro Medicus share price has fallen 27% since the start of the year.
Pro Medicus has one of the highest earnings before interest and tax (EBIT) margins on the ASX, with a margin of 65% in the first half of FY22. The medical imaging tech company recently reported a high level of growth as well, with HY22 profit after tax up 52.7% to $20.7 million and the dividend up 42.9%.
The company continues to see larger healthcare groups choose its Visage software to replace legacy picture archiving and communication systems (PACS). One of the more recent wins was with Novant Health, which signed a $40 million, 7-year contract.
The ASX share boasts of its highly scalable offering with a "contained cost base". The margin continues to grow as its global footprint increases.
It's looking to extend to new geographical markets and develop the next generation of products.
The company says that its contract pipeline remains healthy across many different market opportunities.
Morgans currently rates the healthcare business as a buy, with a price target of $56.20. That implies a possible upside of more than 20% over the next year. It thinks the market volatility provides investors a good price to invest in Pro Medicus.
