The ASX share market is full of interesting businesses. Share prices are changing all the time, so different opportunities can open up. Brave investors may be able to find great cheap ASX share ideas among those shares that have fallen but where it may only be for the short term.
It's understandable why investors have been feeling nervous. Inflation and interest rates are causing uncertainty regarding the medium-term outlook. As Warren Buffett has told us – be greedy when investors are fearful.
After seeing share price declines, I'd rate the following two as buys.
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Pinnacle Investment Management Group Ltd (ASX: PNI)
Pinnacle is heavily involved in the funds management sector. It helps investment professionals launch their own funds management businesses and helps them in a number of different ways, including seed funding, distribution services and infrastructure support.
Since the start of August, The Pinnacle share price is down by around 20% and it has fallen by over 50% from November 2021. I think the ASX share now looks very cheap.
Sentiment about funds management businesses, the fund inflows for Pinnacle's investments, and the underlying investment returns of the fund managers' funds have all deteriorated compared to a couple of years ago. But, I'd call this an opportunistic time to invest when times aren't looking good.
The end of FY23 was positive. Pinnacle's aggregate FUM grew 10% over the six months to June 2023, with $3.1 billion of FUM inflows in the six months to June 2023. It was able to report that 81% of 5-year affiliate strategies had outperformed as at 30 June 2023.
It's trading at 22 times FY23's estimated earnings and I think earnings can return to good growth sooner rather than later.
APM Human Services International Ltd (ASX: APM)
APM says that each financial year, it supports more than 2.1 million people of all ages and stages of life through its service offerings that include assessments – allied health, psychological intervention, medical, psycho-social and vocational rehabilitation, vocational training and employment assistance, and community-based support services. It's in 11 countries, including Australia, the UK, Canada, the US, Germany and South Korea.
FY23 was a solid year despite all of the economic uncertainty – underlying net profit (NPATA) rose 7% to $178.2 million and it generated operating cash flow of $264.3 million.
The company doubled its annual dividend per share to 10 cents, up from 5 cents in FY22.
Over the past year, the APM share price has fallen 44% and it's close to a 52-week low. That means it now has a price/earnings (P/E) ratio of 16 and it has a trailing grossed-up dividend yield of 7.7%. This ASX share now looks cheap to me.
The business has won a number of contracts in recent history, and FY24 will see that revenue and earnings flow through the financials. It's looking to expand its business further in areas like the NDIS market and the allied health sector.
Projections on Commsec suggest that the business is going to grow its earnings per share (EPS) significantly to 20.8 cents in FY24, which would put its forward P/E ratio at just 9. This seems too cheap for a strong listed business like APM which is predicted to grow earnings again in FY25.
