One of the great silver linings of a bear market is that it's sometimes possible to snap up great companies at a bargain price.
Shares on the following list have fallen 30% or greater year to date and have strong business outlooks ahead of them.
However, these companies are unlikely to stay cheap forever.
So to lock in some potential gains, let's cover which shares could be worth buying before the curtain falls on 2023.
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Nine Entertainment Co Holdings Ltd (ASX: NEC)
The Nine Entertainment share price is down 30.7% so far this year but could be poised to recover strongly. One reason to be bullish is that the company's revenues are scaling upwards.
Nine Entertainment's advertising revenue growth is primarily driven by the company's strong presence in the Australian media market. Nine Entertainment is the leading commercial free-to-air broadcaster in Australia and is home to some of the country's most popular television shows.
In August, the company reported its revenues increased 15% YOY (year over year) to $2.7 billion in FY2021. Meanwhile, its bottom line also saw a lift, with its earnings before interest, taxes, depreciation, and amortisation (EBITDA) growing 24% to $700.7 million.
Some analysts agree the share could be undervalued. These include Shaw and Partners portfolio manager James Gerrish, who noted:
At just 11 times expected FY23 PE, Nine is undervalued and recent numbers suggest the underlying business is holding up better than expected.
Xero Limited (ASX: XRO)
Xero, which provides a software-as-a-service (SaaS) accounting solution to businesses, has also had a rough year, with its shares losing almost 50% of their value year to date.
Some reasons to be bullish about Xero include its total addressable market, recent financial performance, and discounted share price.
When the company reported its results for FY2021 in May, Xero stated it had grown its user base in all of its key regional operating segments including Australia, New Zealand, and the United Kingdom.
Looking ahead, there could be a strong opportunity for Xero to continue adding users in its North American segment where it reported a relatively low user penetration of 339,000 subscribers. With approximately 33.2 million small businesses in the United States alone, it suggests substantial room for growth.
In terms of Xero's financials and key metrics, its total subscribers grew 19% YOY in FY2021 to 3.3 million, while its annualised monthly recurring revenue (AMRR) grew 28% to NZ$1.2 billion. It should be noted Xero recorded a net loss after tax of NZ$9.1 million during this period.
As for its share price, Morgans gave it a price target of $77 earlier this month. That represents an upside of 5.5% at the time of writing.
ARB Corporation Limited (ASX: ARB)
ARB designs and manufactures automotive accessories for four-wheel-drive (4WD) and light commercial vehicles. The company has seen its share price drop 47% so far this year.
But its recent top and bottom line performances, as well as its robust balance sheet may pique investors' interest.
As part of its full-year results for FY2022, ARB stated its revenues grew 11.4% YOY to $697.3 million while net profit after tax (NPAT) grew 8.1% YOY to $122 million. At the time, ARB said it had no debt on its books along with a healthy cash reserve balance of $52.7 million.
Although it declined to give revenue and earnings guidance as part of its results, ARB did paint a bullish picture of where it will be headed in 2023 and beyond.
ARB Corporation's managing director Andrew Brown said:
The board remains positive and expects that the company should benefit by the end of calendar 2022 from recent new vehicle models, a strong customer order book sitting well above historical levels, a number of all-new products due for imminent release, healthy demand for the company's products around the world and the prospect of increasing supply of new vehicles to the market.
Citi analysts gave ARB Corporation's share a price target of $39.25 in November. That represents almost a 40% upside at the time of writing.
