3 ASX All Ords shares I'm watching like a hawk in January

All three of these small cap ASX shares are exciting to me.

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Key points

  • Adore Beauty shares were smashed last year, but the company is still showing promising signs
  • Australian Ethical is seeing ongoing growth of its funds under management
  • Healthcare business Healthia continues to scale

I think there are a number of All Ordinaries (ASX: XAO), or All Ords, shares that have fallen heavily over the past year that now seem very interesting.

In my opinion, there are some names that could see a good turnaround this year after a tough time in 2022.

When something drops, it only needs to recover some of its lost ground to make a big return. For example, if something drops 50% from $100 to $50. Just rising to $75 would be a capital growth of 50%.

With the growth outlook for the below three ASX All Ords shares looking promising, I'm watching these three closely.

Adore Beauty Group Ltd (ASX: ABY)

Adore Beauty is a leading online retailer of beauty products. The business saw a big bump in demand during the COVID-19 period. But, I think there is a longer-term trend of shopping going digital, with younger generations more confident about e-commerce.

Over the past year, the Adore Beauty share price has fallen more than 70% as the company has found it difficult to outperform its recent success. However, I believe that the ASX All Ords share may have been oversold considering its long-term growth outlook.

I like some of the things I'm seeing from the business – growth of returning customers, slow-but-steady gross profit margin improvement, and the launch of owned brands.

The first month of Viviology, Adore Beauty's first skincare brand, saw sales "well exceed" internal expectations.

Over the next 12 months and five years, I think the Adore Beauty share price can outperform the market, particularly if the annual revenue per active customer keeps rising and profit margins improve thanks to scale benefits.

Australian Ethical Investment Ltd (ASX: AEF)

Australian Ethical is a growing fund manager that focuses on providing investment options – both managed funds and superannuation – for investors seeking much more focus on the ethics and sustainability of the businesses being invested in on their behalf.

This is proving to be popular because the company is seeing healthy inflows every quarter. In the two months to November 2022, the company saw $120 million of net inflows.

The All Ords ASX share also recently saw Christian Super funds join Australian Ethical, which added another $1.93 billion and 28,000 members to the business. Australian Ethical has reduced its fees so that new and existing members benefit from increased competitiveness of its super options.

The net inflows and Christian Super addition combined saw the company's funds under management (FUM) rise 39% from 30 September 2022. But, the Australian Ethical share price is down almost 60% over the past year.

I think a rebound of the share market could be very useful for the company's FUM and profitability.

Healthia Ltd (ASX: HLA)

Healthia is described as an integrated allied healthcare organisation that includes networks of optometry, podiatry, and physiotherapy clinics.

The Healthia share price has fallen around 40% over the past year.

It's working on a number of goals. The company has been making acquisitions to grow its scale. It currently has a market share of around 3%, but it wants to be able to easily reach 50% of Australian and New Zealanders.

Research and development, and improving quality, are two other areas of focus. For example, it wants to co-locate complementary allied health services inside its existing footprint, as well as offering new services in existing clinics, such as retinal scanners in its optical stores.

The ASX All Ords share is expecting same clinic revenue growth of between 3% to 6% year over year. I think this will be a good tailwind for earnings, combined with increasing scale.

According to Commsec, it's valued at just 11 times FY23's estimated earnings.

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 positions in and has recommended Australian Ethical Investment and Healthia. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group. The Motley Fool Australia has recommended Adore Beauty Group, Australian Ethical Investment, and Healthia. 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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