2 bargain ASX 200 shares to buy from reporting season so far

Two quality companies are going for cheap right now, says Wilsons' Rob Crookston. Are you game enough to dive in?

| More on:
A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Reporting season can be a crazy time.

The market becomes very reactionary to the numbers just released, which is understandable. But such knee-jerk responses are antithetical to long-term investing.

This is why some bargains could be bought if you can keep your head and stay focused on the long-term picture.

Wilsons equity strategist Rob Crookston has spotted two S&P/ASX 200 Index (ASX: XJO) shares that are exactly in this situation:

Market is worried for nothing

Resmed CDI (ASX: RMD) shares have dipped a shocking 23.6% since the company's results on 4 August.

There are two concerns that the market is anxious about, but Crookston argues neither are long-term headwinds.

First is the revelation of a slower-than-expected supply build of its AS11 sleep apnoea device.

"Ultimately, the slight delay to AS11 supply becoming unconstrained (relative to market expectations) means little competitively or strategically, apart from depriving investors of an earnings surprise 'sugar hit'; that could have boosted stock performance near-term," Crookston said in a Wilsons memo to clients.

"Most importantly, our medium and long-term view remains intact with RedMed still well placed to carve out permanent CPAP market share gains from the Koninklijke Philips NV (AMS: PHIA) recall, while gross margins should improve over time as AS11 supply builds."

The second threat is new fad weight loss drugs, such as Ozempic.

The idea is that if consumers find it easier to lose weight, there will be fewer people who experience sleep apnoea.

Crookston said his team is "sanguine" about this risk to ResMed.

"Diagnosis rates of obstructive sleep apnea in the US are estimated at less than 20% and ~35% for moderate-severe patients. 

"Therefore, there is still a long runway for growth in the CPAP market, and even modest improvements in diagnosis rates could effectively cancel out the potential top-line effects of weight loss drugs on CPAP demand."

The housing market will boom soon

While the James Hardie Industries plc (ASX: JHX) share price popped on the day of the company's annual report, it has sunk 5.6% since 15 August.

Crookston noted that, despite rising interest rates, the construction materials provider has fared better in its North American business than anticipated.

"The company has shown resilience with impressive margins, thanks to both price/mix adjustments, optimised operational spending, and fall in the price of freight."

The company is now poised to cash in.

"James Hardie is well positioned even with a backdrop of macro headwinds and is expected to benefit from a cyclical recovery in US housing over the next 12 to 24 months."

"The investment focus remains on growth in the fibre cement category, US housing undersupply since the GFC, and the ageing of US housing stock."

Crookston's team is therefore sticking with its "positive long-term outlook" for James Hardie, and the shares are cheap to boot.

"The stock's valuation is seen as compelling relative to growth potential, trading at an FY24 PE of ~20x."

Motley Fool contributor Tony Yoo has positions in ResMed. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Investing Strategies

A man closesly watch a clock, indicating a delay or timing issue on an ASX share price movement
Dividend Investing

25 ASX 200 shares with ex-dividend dates next week

There are 25 ASX 200 shares scheduled to go 'ex-div' next week.

Read more »

man doing stocktake at supermarket
Dividend Investing

Guess which ASX 200 stock is predicted to pay an 8% dividend yield in 2025

It could be rewarding to own this business.

Read more »

A woman has a thoughtful look on her face as she studies a fan of Australian 20 dollar bills she is holding on one hand while he rest her other hand on her chin in thought.
Dividend Investing

Want big income? Buy these high-yield ASX dividend shares

Analysts think these income options are in the buy zone right now.

Read more »

Blue Chip Shares

These super-strong ASX 200 blue chip shares could deliver 20% returns

Analysts believe big returns could be on the cards for owners of these shares.

Read more »

Middle age caucasian man smiling confident drinking coffee at home.
Dividend Investing

Analysts have put buy ratings on these ASX dividend stocks

Here's what they are saying about these dividend stocks following their results.

Read more »

An older couple driving in a convertible on a freeway.
Dividend Investing

1 ASX 200 dividend stock I'm buying for superior passive income in 2024

This ASX 200 dividend stock trades on a juicy yield and could see sizeable share price gains in 2024.

Read more »

An oil refinery worker stands in front of an oil rig with his arms crossed and a smile on his face as the Woodside share price climbs today
Dividend Investing

2 cheap ASX stocks that offer more than 8% dividend yields

Aussie investors have a huge range of excellent income stocks to choose from. Here's a couple trading at a decent…

Read more »

A woman holds a tape measure against a wall painted with the word BIG, indicating a surge in gowth shares
Growth Shares

Goldman Sachs says these ASX growth shares are destined for big things

There's a reason Goldman has slapped buy ratings on these shares.

Read more »