This Christmas period could be a great time to pick up some ASX share bargains. On a three-year outlook, I think the two stocks I'm going to tell you about look really good value.
Short-term problems can cause share prices to fall, but this can be a chance to buy good businesses at a cheaper price.
The two I'm going to talk about are not exactly household names, but they play an important part in Australian life.
Accent Groop Ltd (ASX: AX1)
Accent is the distributor of a large number of shoe brands in Australia, such as Skechers, Timberland, CAT, Vans, Dr Martens, Kappa, Hoka, Ugg and Merrell. It also has some brands it's responsible for: The Athlete's Foot, Glore Store, Nude Lucy, Stylerunner and more.
The business has around 800 stores across all of these different brands and it continues to roll out more stores. It's expecting to open 70 new stores in the first half of FY24, which can offset some of the retail pain for existing stores, supporting total sales.
Accent's digital sales continue to impress – FY23 digital sales were up 211% compared to FY19, with the number of orders up 118.4%. The ASX share's digital sales were 19.1% of total retail sales, up from 10.2% in FY19.
Shoes are obviously an important thing that most people need, and the growing Australian population is a helpful tailwind for demand.
There is a forecast for a bit of an earnings recovery in FY25 according to Commsec, which would put the current Accent share price at 13 times FY25's estimated earnings. I think that's a good valuation for a growing business. It could pay a grossed-up dividend yield of 9.6%, according to the projection.
Duxton Water Ltd (ASX: D2O)
Duxton Water is a business that invests in water entitlements and leases them to farmers on short-term and long-term contracts.
After a few years of wetter weather thanks to La Nina, I think the change to El Nino could mean stronger water values in the next few years if there's less rainfall and the levels of water at storage locations in the southeast start reducing.
Duxton Water recently revealed that in November, the aggregated value of water entitlements in the southern Murray-Darling Basin increased on average by 1.6%.
The business is paying a steadily-growing dividend which provided good returns even during the time of weakening water prices in recent history. Though, dividends are not guaranteed of course.
In FY24, it's expecting to pay an annual dividend per share of 7.3 cents, which translates into a forward grossed-up dividend yield of 6.7%.
