Top ASX value shares to buy in 2023

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
― Warren Buffett

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Warren Buffett is perhaps the world's most famous and successful value investor. If like him, and the father of value investing, Benjamin Graham, you believe fear and greed often result in the mispricing of shares, you may already be a value investor.

But the value investing strategy is not without its pitfalls. Investors need to be able to sniff out genuine value shares they believe are trading below their intrinsic value, whilst at the same time avoiding the perils of value traps.

So, if you're keen for some insights into which ASX shares could potentially be trading at bargain prices right now, you're in luck! Because we asked our Foolish contributors which companies they believe could be flying well under the radar in the new year. Here is what the team came up with:

6 best ASX value shares for 2023 (smallest to largest)

Shaver Shop Group Ltd (ASX: SSG), $150.66 million

Michael Hill International Ltd (ASX: MHJ), $419.56 million

Universal Store Holdings Ltd (ASX: UNI), $435.01 million

Adairs Ltd (ASX: ADH), $497.5 million

MFF Capital Investments Ltd (ASX: MFF), $1.42 billion

JB Hi-Fi Limited (ASX: JBH), $5.15 billion

(Market capitalisations as at market close on 17 January 2023)

Why our Foolish writers love these ASX value shares

Shaver Shop Group Ltd

What it does: Shaver Shop operates in Australia and New Zealand. It has been operating since 1986 and now has more than 120 stores selling male and female hair removal products such as electric shavers, clippers and trimmers, and wet shave items. It also sells a wide range of products across oral care, hair care, massage, air treatment, and beauty categories.

By Tristan Harrison: Starting with how good value Shaver Shop is, this ASX share is currently priced at around eight times FY24's estimated earnings and less than 10 times FY23's estimated earnings, according to Commsec data. As such, the dividend income alone could amount to a dividend yield of around 12.6% in 2023.

The beauty and personal care market is growing, and Shaver Shop's sales have steadily grown over the past decade. Reopened stores after lockdowns are generating good sales levels (up 13% year over year) to 6 November 2022, with a higher gross profit margin.

Growth of exclusive products generates around 60% of gross profit for Shaver Shop. The company is looking to grow these sales, as well as expand its store network in New Zealand. Plus, it's expanding the range of products it's selling.

For these reasons, I believe Shaver Shop would make a top buy for ASX value investors right now.

Motley Fool contributor Tristan Harrison does not own shares of Shaver Shop Group Ltd.

Michael Hill International Ltd

What it does: Founded in 1979, Michael Hill is a jewellery retailer spanning Australia, New Zealand, and Canada with 280 stores. The company's brand has become synonymous with high-quality rings, earrings, necklaces, and more through its prominent advertising.

By Mitchell Lawler: Michael Hill does not have the hallmark traits of an ASX share I'd typically be interested in. It operates in a highly competitive market that is difficult to differentiate in, and the lack of meaningful revenue growth compared to five years ago leaves plenty to be desired.

However, management has done a great job of guiding the company through the pandemic. Where other retailers went boom and then bust – or simply went bust – Michael Hill has maintained a commendable earnings margin.

Furthermore, the company's balance sheet is now in impeccable condition. At the end of June 2022, Michael Hill held $95.8 million in cash and no debt – allowing the company to conduct a $10.2 million share buyback and pay 7.5 cents per share in dividends in FY22.

At a price-to-earnings (P/E) ratio of nine times, based on the current share price, I think there could be some decent upside to Michael Hill shares this year.

Motley Fool contributor Mitchell Lawler does not own shares of Michael Hill International Ltd.

Universal Store Holdings Ltd

What it does: Universal Store is the retail company behind the eponymous Universal Store brand. It also recently completed the acquisition of Byron Bay-based fashion brand Thrills.

By James Mickleboro: Although Universal Store's shares have rebounded strongly from their 52-week low, I don't believe it is too late to invest. Based on Goldman Sachs' earnings per share (EPS) forecast of 37.3 cents, at the time of writing, the company's shares are trading at around 15 times forward earnings.

I feel this is great value given that Goldman is forecasting a 22.4% earnings before interest and tax (EBIT) compound annual growth rate (CAGR) over the next three years (FY22-25). This is expected to be underpinned by the company's exposure to younger consumers, which should remain resilient relative to the broader population in the current environment, thanks to an increase in the minimum wage.

Goldman has a buy rating and $7.20 price target on Universal Store shares. 

Motley Fool contributor James MIckleboro does not own shares of Universal Store Holdings Ltd.

Adairs Ltd

What it does: Adairs retails home furnishings in Australia and New Zealand, boasting more than 170 stores. It also operates subsidiaries Mocka and the recently acquired Focus on Furniture.

By Brooke Cooper: The Adairs share price has suffered lately, falling by around 27% in 12 months. However, I believe it's now trading at a decent price.

The company posted earnings per share (EPS) of 26.4 cents for financial year 2022 (FY22) – leaving it with a price-to-earnings (P/E) ratio of 10.5.

Additionally, Adairs' paid loyalty program has more than a million members – a competitive advantage expected to grow by up to 10% annually in coming years. The company also has a five-year target of $1 billion in annual sales – up from $565 million in FY22.

Finally, Goldman Sachs says the company's business is more resilient than some may assume and tips its dividends to grow 11% by FY24.

Motley Fool contributor Brooke Cooper does not own shares of Adairs Ltd.

MFF Capital Investments Ltd

What it does: MFF Capital is a listed investment company (LIC) that invests in a portfolio of mostly US-listed shares.

By Sebastian Bowen: I think MFF Capital shares represent compelling value right now. This LIC invests in a concentrated portfolio of international shares. Some of its current holdings include Mastercard, Asahi Group, and Amazon.

By investing in top-quality names like these, MFF has been able to deliver double-digit returns, on average, for many years now.

However, as it stands today, this LIC is trading at a significant discount to the underlying value of its investment portfolio. As such, I think investors are getting a bargain at the current price, the equivalent of buying $1 worth of assets for 90 cents.

Motley Fool contributor Sebastian Bowen owns shares of MFF Capital Investments Ltd, Mastercard, and Amazon.

JB Hi-Fi Limited

What it does: JB Hi-Fi sells home entertainment and technology products through its eponymous stores, and home appliances through its Good Guys stores. It operates through a network of physical stores across Australia and New Zealand and its growing online platform.

By Bronwyn Allen: I like this business because it's simple to understand. JB Hi-Fi sells TVs, laptops, mobile phones, and loads of other electronic gadgets that people seem to love buying and endlessly upgrading. JB Hi-Fi also sells home appliances, which we all need to replace now and then.

Plus, Aussies are a property-mad bunch who love renovating, which means thousands of householders are buying a whole slew of appliances at once for every new kitchen, laundry, and living room created per year. So, I believe the ongoing demand for JB Hi-Fi's products is strong. It's no surprise to me that the company was among the top three best-performing ASX 200 retail shares in 2022.

While the JB Hi-Fi share price actually lost 13.2% in value last year, this followed a 99% surge from its COVID-crash trough through to the end of 2021. So, this pull-back looks like a buy-the-dip opportunity for 2023 to me.

From a value perspective, JB Hi-Fi shares are trading on a very low and, for me, extremely appealing price-to-earnings (P/E) ratio of 9.54, according to the ASX.

Motley Fool contributor Bronwyn Allen does not own shares of JB Hi-Fi Limited.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs, Amazon.com, and Mastercard. The Motley Fool Australia has positions in and has recommended Adairs. The Motley Fool Australia has recommended Amazon.com, Jb Hi-Fi, and Mastercard. 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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