The volatility we've seen on the ASX share market has thrown up a number of interesting investment questions and possible opportunities.
Businesses that have plans to improve their foundations for growth could be opportunities for the long term. While a low price/earnings (P/E) ratio doesn't automatically mean that a business is good value, when combined with longer-term earnings growth, it could lead to good results over time.
Growing store counts won't automatically lead to higher revenue and profit, but I think these two ASX shares have plenty of potential at the current levels.
Bapcor Ltd (ASX: BAP)
Bapcor is an auto parts business that operates through a number of different brands including Burson, Autobarn, Autopro, Midas, ABS, Truckline and WANO.
The Bapcor share price has fallen by 15% since the beginning of 2022. That's despite the business recently saying in a trading update that it had "performed strongly" with "strong market demand".
In the FY22 third quarter, trade segment revenue rose 5.2% year on year, retail revenue was down 1.6% but online retail sales had jumped 39.7% year on year. Specialist wholesale revenue was up 10.1% year on year.
The ASX share is going to do a number of things to improve its profitability including optimising its pricing, procurement and property management, while also leveraging its end-to-end supply chain advantage.
The business wants to grow its store network from 1,100 to 1,500 locations, while also growing the percentage of sales that are 'own brand.'
According to Commsec, the Bapcor share price is valued at 16 times FY22's estimated earnings. I think this is an attractive valuation with the company's plans to grow its footprint and margins.
Adairs Ltd (ASX: ADH)
Adairs is one of the country's larger retailers of furniture and homewares. However, it's a bit smaller after the Adairs share price fell 51% in 2022 to date.
The business sells through three different brands – Adairs, Mocka and Focus on Furniture. The ASX share has plans to grow all three segments. It wants to grow its number of members, grow the store count, increase its online sales and upsize some existing stores.
Adairs recently bought Focus on Furniture, which gives the company an increased exposure to the bulky furniture segment.
I think that the company's plan to upsize some Adairs stores is a good one because it reportedly leads to an average increase in profit of approximately 60% for that store. One example of a benefit of a larger store is being able to display more of its products to customers. Range expansion at all three businesses is also seen as a future growth driver.
The dividend can also be a helpful boost for the returns of Adairs. According to CMC, Adairs could pay a grossed-up dividend yield of 13.7% in FY23.
CMC's numbers suggest that the Adairs share price is now valued at 7 times FY23's estimated earnings.
