We all love buying things on sale! And why would you pay full price for an item if you can get it at a discount?
The theory of value investing is that sometimes the market's assessment of what a company is worth is inaccurate. And this presents opportunities for savvy bargain hunters to swoop in and buy quality ASX shares for less than their true value.
But, naturally, the key to successful value investing is learning to differentiate between truly great-value companies and those that may not be as cheap as they appear.
So, we asked our Foolish writers which ASX shares they reckon have been mispriced by the market and offer compelling buying for value investors in February. Here is what they said:
6 best ASX value shares for February 2023 (smallest to largest)
Adore Beauty Group Ltd (ASX: ABY), $104.01 million
Temple & Webster Group Ltd (ASX: TPW), $681.14 million
HomeCo Daily Needs REIT (ASX: HDN), $2.8 billion
Metcash Limited (ASX: MTS), $4.0 billion
Whitehaven Coal Ltd (ASX: WHC), $7.31 billion
Woodside Energy Group Ltd (ASX: WDS), $67.65 billion
(Market capitalisations as at market close on 3 February 2023)
Why our Foolish writers love these ASX value stocks
Adore Beauty Group Ltd
What it does: Adore Beauty claims to be the leader of online beauty retailing in Australia. It sells around 12,000 products from more than 270 brands. The company has recently launched two of its own private brands – Viviology and AB Labs.
By Tristan Harrison: I think this ASX All Ords share now looks great value after falling 75% since the beginning of 2022.
In the first quarter of FY23, returning customers increased by 14% year over year, and were up 85% over two years. The business is growing sales numbers through its app, and continues to onboard more brands (such as Dior).
Adore is expanding into New Zealand and is also working on delivering scale benefits, which should help with earnings before interest, tax, depreciation and amortisation (EBITDA) margin expansion over time.
I also think consumers will continue increasing the amount they shop online over time, which should be a tailwind for Adore Beauty in the coming years.
Motley Fool contributor Tristan Harrison does not own shares in Adore Beauty Group Ltd.
Temple & Webster Group Ltd
What it does: Temple & Webster is Australia's leading online furniture and homewares retailer.
By James Mickleboro: Although it has rebounded strongly from its lows, I still see a lot of value in the Temple & Webster share price for patient, long-term investors. That's because, despite this rebound, the online retailer's shares are still trading at an almost 50% discount to its long-term-average-enterprise value to gross-profit multiple.
I believe this makes Temple & Webster shares great value given the company's exceptionally strong, long-term growth potential, thanks to its leadership position in a retail category that is still in the early stages of shifting online.
Goldman Sachs agrees and is forecasting a +22% 10-year EBITDA compound annual growth rate (CAGR).
Motley Fool contributor James Mickleboro does not own shares in Temple & Webster Group Ltd.
HomeCo Daily Needs REIT
What it does: HomeCo Daily Needs is a real estate investment trust (REIT) holding properties that house the retailers and services Aussies turn to in their day-to-day lives. Its $4.6 billion portfolio boasts a 99% occupancy rate with Woolworths Group Ltd (ASX: WOW), Wesfarmers Ltd (ASX: WES), and Coles Group Ltd (ASX: COL) among its largest tenants.
By Brooke Cooper: The HomeCo Daily Needs unit price tumbled 19% over the course of 2022 despite the REIT posting a 30% lift in funds from operations last financial year. While the stock has recovered slightly in 2023, I believe it still offers great value.
It currently boasts a 6.1% dividend yield and a price-to-earnings (P/E) ratio of 10.96, according to CommSec data.
But it's not just those figures catching my eye. I like the strategic positioning of many of this ASX 200 stock's assets and its exposure to discretionary retail.
Morgans also has an add rating and a $1.52 price target on the REIT – a potential 10.5% upside at the time of writing.
Motley Fool contributor Brooke Cooper does not own units in HomeCo Daily Needs REIT.
Metcash Limited
What it does: Metcash is the supermarket and hardware distribution company behind the famous chains IGA, Mitre 10 and Bottle-O.
By Sebastian Bowen: When it comes to ASX 200 consumer staples shares, Metcash is often overlooked in favour of its peers like Woolworths. But I think this has resulted in some significant value.
Metcash shares currently trade on an earnings multiple far lower than either Woolworths or Coles. This has resulted in a substantial, fully-franked dividend yield of more than 5% today.
Back in December, Metcash announced that it had grown revenue by almost 8%, profit by more than 9% and dividends by 9.5%. I think these are all great signs and prove that Metcash is still a compelling value share in February 2023.
Motley Fool contributor Sebastian Bowen does not own shares in Metcash Limited.
Whitehaven Coal Ltd
What it does: ASX 200-listed Whitehaven Coal explores for and produces high-quality thermal coal (primarily used to generate electricity) and metallurgical coal (primarily used for steel making).
By Bernd Struben: The Whitehaven share price has slipped 11% so far in 2023, making it a top ASX value stock, in my opinion. Shares hit all-time highs in October but have dipped as coal prices retraced from their own records. Yet, I expect global demand for quality Aussie coal to remain strong as the Ukraine war drags on.
And don't forget the record half-year Whitehaven reported last month, with an all-time high of $2.6 billion in earnings before interest, tax, depreciation and amortisation (EBITDA) over six months.
Whitehaven pays a trailing dividend yield of 5.8%. The share price is up 202% over 12 months.
Motley Fool contributor Bernd Struben does not own shares in Whitehaven Coal Ltd.
Woodside Energy Group Ltd
What it does: Woodside is an Australian oil and gas company and the largest energy business listed on the ASX. It is a global, top-10 producer of liquefied natural gas (LNG) and hydrocarbon.
By Bronwyn Allen: It might seem odd to pick an ASX share trading at close to its 52-week high as a value buy. But this oil and gas giant is only trading on a price-to-earnings (P/E) ratio of 8.4!
Woodside is also riding a wave of high commodity prices right now. It's just reported record full-year production and revenue for 2022, beating its own production guidance with full-year revenue up 142% compared to 2021.
This reflects not only high oil and gas prices but also the value of Woodside's merger with the petroleum business of BHP Group Ltd (ASX: BHP). This was finalised on 1 July 2022. So, these full-year results represent only half a year's worth of production from these new assets.
That's what has me excited about Woodside's future earnings potential. It's also a good dividend payer, and the company has hinted at special dividends and share buy-backs post-merger, too.
Motley Fool contributor Bronwyn Allen owns shares in Woodside Energy Group Ltd.
