Potential buys from experts: 2 compelling ASX shares

Breville is one of the ASX shares that experts believe could be a good prospect.

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Key points

  • Experts have identified two ASX shares that have a potential upside of at least 40%
  • Global kitchen appliance maker Breville is one of those ideas
  • International jewellery business Michael Hill is another compelling ASX share

Experts have been on the lookout for ASX share opportunities that could have plenty of upside amid the current market volatility.

Businesses that have seen declines but are still doing well operationally could be ideas to consider, according to brokers.

The below two share ideas have price targets much higher than their current values. A price target is where brokers and analysts think the share price will be in 12 months' time.

Breville Group Ltd (ASX: BRG)

Breville is a business that sells kitchen appliance products to more than 70 countries around the world.

It's currently rated as a buy by the broker UBS with a price target of $34. That's a potential rise of more than 60%.

The company recently reconfirmed its FY22 guidance. It said that it expects earnings before interest and tax (EBIT) for the full 2022 financial year to be consistent with the markets' consensus forecast of around $156 million. This included an assumption of no material supply chain interruptions beyond what was experienced in the first half of FY22.

Breville also pointed out that the ASX share continues to geographically expand. It is now live in Norway, Finland, Denmark, and Sweden. In June, it's planning to expand to South Korea and then to Poland in July.

UBS thinks that the company can deliver ongoing double-digit earnings per share (EPS) growth over the next few financial years.

According to UBS, the Breville share price is valued at FY23's estimated earnings.

Michael Hill International Ltd (ASX: MHJ)

Michael Hill has more than 280 jewellery stores globally across Australia, New Zealand, and Canada. Its global HQ, wholesale, and manufacturing divisions are located in Brisbane, Australia.

Citi currently rates Michael Hill as a buy, with a price target of $1.61. That implies a possible upside of more than 40% on the business.

Citi thought that the company's recent trading update was better than the broker was expecting, with good profit margins and sales.

As a refresher, in that quarter for the three months to March 2022, all store sales increased 11.1% while same store sales rose by 4.8%.

The ASX share also pointed to "sustained margin expansion", with margin growth of between 200 basis points to 300 basis points in all markets and channels compared to the third quarter of FY21.

It's also seeing "strong digital growth". Digital sales in the year to date were up 31.1% and represented 7.6% of total sales, up from 6.3% of total sales in FY21. It's doing strategic market analysis to identify new territories for international digital expansion. This is "progressing well".

The company also said that it's continuing to explore potential acquisition targets with its "strong balance sheet". Management said that it's being disciplined with its working capital management and there are no adverse supply chain impacts on its stock levels.

According to Citi, the Michael Hill share price is valued at 10 times FY23's estimated earnings.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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