2 cheap ASX shares to buy in May: Experts

Adairs and Best Buy are two ASX shares that have low p/e ratios, which experts rate as buys.

| More on:
cheap stocks represented by open brief case with golden light shining from it

Image source: Getty Images

Key points

  • Experts like these two ASX shares which are valued at low earnings multiples
  • Best & Less is a retailer of affordable apparel for families
  • Adairs is a homewares and furniture retailer

Experts have buy ratings on some ASX shares that have low price-to-earnings ratios. Hence, these shares could be opportunities in May 2022.

Businesses that have low earnings multiples are sometimes viewed as ‘cheap’ if they are expected to grow earnings. This can also lead to a high dividend yield if the ASX shares have a relatively high dividend payout ratio.

Here are two that experts rate as buys:

Best & Less Group Holdings Ltd (ASX: BST)

Best and Less is an apparel retailer which aims its ‘affordable’ products at mums and families.

The company is rated as a buy by the broker Macquarie, with a price target of $4.10. That suggests a possible upside of around 30%.

While the first half of FY22 was affected by COVID lockdowns, there were some statistics that showed improvement. The gross profit margin improved by 210 basis points to 50.8%. The cost of doing business (CODB) decreased by 7% to $115.4 million, however net profit after tax (NPAT) did drop by 21.3% after a 13.8% decline in revenue to $287.5 million.

According to Macquarie, the Best & Less share price is valued at under 9 times FY22’s estimated earnings and around 8 times FY23’s estimated earnings.

Macquarie expects the Best & Less dividend yield to be high. In FY22, the grossed-up dividend yield is expected to be 12.4%. Then, in FY23, Macquarie expects the Best & Less grossed-up dividend yield to be 12.9%.

The cheap ASX share has a number of strategies to keep growing the business including increasing its market share in ‘baby and kids’, improving the womenswear offer, investing in online capabilities and securing new store sites.

Adairs Ltd (ASX: ADH)

Adairs is a retailer of homewares and furniture through three different brands: Adairs, Mocka and Focus on Furniture.

The business has a number of plans to grow its operations.

Adairs says that its larger stores are much more profitable than its smaller format stores. So it’s working on upsizing its stores in certain locations.

The business has opened a new national distribution centre. This is aimed to increase efficiencies, improve stock flow, allow it to fulfil more online orders and save on costs.

It’s aiming to grow its membership numbers because members typically spend more and are more loyal.

The cheap ASX share also plans to expand the Focus on Furniture store network in Australia, as well as grow its online sales.

It’s currently rated as a buy by the broker Morgans. The Adairs share price is valued at 7 times FY23’s estimated earnings. Adairs has a projected grossed-up dividend yield of 13% for FY23.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended ADAIRS FPO. The Motley Fool Australia owns and has recommended ADAIRS FPO. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Cheap Shares

ASX bank shares buy A young boy in a business suit giving thumbs up with piggy banks and coin piles
Cheap Shares

3 ASX shares to pounce on after tax-loss selling: report

This trio of stocks could be bargain pick-ups after investors dump them in the traditional end-of-financial-year tax minimisation run.

Read more »

Galaxy Resources capital raisegrowth in asx share price represented by multiple hands all placing coins in a piggy bank
Broker Notes

Are these 2 beaten-up ASX shares too cheap to ignore in June 2022?

Accent Group is one of the ASX shares that experts think is cheap.

Read more »

A man in a business suit wearing boxing gloves slumps in the corner of a boxing ring representing the beaten-up Zip share price in recent times
Broker Notes

2 ASX shares experts think have sold off too much

Which stocks have seen their value plummet even though the underlying businesses have not changed one iota? This pair.

Read more »

Smiling man sits in front of a graph on computer while using his mobile phone.

Why I think these 3 ASX shares are top-quality buying at today’s prices

Here are my top 3 ASX shares that I believe are in bargain territory.

Read more »

Woman on her laptop thinking to herself.
Retail Shares

Are these 2 small ASX shares too cheap to ignore?

Some cheap ASX shares could offer opportunities. Let's take a look.

Read more »

Two kids are selling big ideas from a lemonade stand on the side of the road for cheap!
Cheap Shares

2 cheap ASX shares to buy right now: experts

JB Hi-Fi and Accent are two ASX shares with low valuations.

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Cheap Shares

2 ASX shares at ‘appealing’ buy prices right now

Stock markets have been in turmoil this year, especially the past month. Here are a couple of bargains worth considering.

Read more »

three young children weariing business suits, helmets and old fashioned aviator goggles wear aeroplane wings on their backs and jump with one arm outstretched into the air in an arid, sandy landscape.
Broker Notes

48% fall: Fund names 3 ASX shares to take off after heavy crash

Many non-mining stocks have been hammered this year, but that could mean there are some bargains waiting to skyrocket.

Read more »