Looking for ASX value shares? Here's 1 I'd buy and 1 I'd avoid!

It's not an easy exercise to identify which stocks are undervalued and which ones are simply terrible. Here's an example of each.

| More on:
Modern accountant woman in a light business suit in modern green office with documents and laptop.

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

It can be tricky working out ASX value shares.

The very definition makes identifying such stocks a subjective exercise. Different investors have varying criteria as to what they consider a bargain.

For me, I do a simple test. Does the business have a positive outlook?

Using this simple metric, I have picked out one that I am convinced is value right now and another that seems like a sure value trap:

ASX value shares not slowing down for anyone

Regis Healthcare Ltd (ASX: REG) provides aged care residences, including for clients with specialised needs such as dementia and palliative care.

Incredibly its share price has rocketed more than 151% since a trough in March last year.

And the market has warmly received its contribution this reporting season, sending the share price almost 6% upwards just on Monday.

Revenue for the first half was up 26% and net profit after tax (NPAT) before amortisation of operational places rocketed 527%.

To top it off, Regis Healthcare is paying out a respectable 3.7% half-franked dividend yield.

A rapidly ageing population in Australia also provides a long-term demographic tailwind for Regis and its industry.

Professional investors are thus bullish on Regis' future. 

Broking platform CMC Invest currently shows five out of six analysts rating the shares for the $1.1 billion aged care provider as a buy.

'A serial destroyer of shareholder value'

Meanwhile, construction giant Lendlease Group (ASX: LLC) has sat through a much less comfortable earnings season.

In fact, it's been downright painful, with the shares diving 15% on the morning that its half-year numbers were revealed on 19 February.

Just before COVID-19 panic struck the ASX, LendLease shares were almost touching the $20 mark. But now, just four years later, they are only slightly above $6.

All up it has burnt nearly 70% of value for shareholders since February 2020.

Tanarra chief executive John Wylie, who had supported the company for a long time, finally ran out of patience.

"This is a broken business model and the company clearly needs restructuring," Wylie told the Financial Review after the half-year results. 

"Lendlease has a reputation of building fine buildings, but it is also a serial destroyer of shareholder value."

This is why I think maybe LeadLease is one to leave on the shelf, at least for now.

Only two out of nine analysts covering the stock currently recommend it as a buy, according to CMC Invest.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Value Investing

A couple consider the pros and cons of taking out a loan
Value Investing

3 ASX stocks boasting better margins than Nvidia

Think you can't find Nvidia-like margins among Aussie shares... think again.

Read more »

a man with a wide, eager smile on his face holds up three fingers.
Value Investing

3 Australian value stocks to buy right now

I think these stocks are capable of beating the market.

Read more »

An ASX investor relaxes on her couch as the Harvey Norman share price drops due to the shares trading ex-dividend from today.

Cheap and growing: The best bang for buck ASX shares I'd buy

Three companies that I believe are outstanding quality despite being thrown in the discount bucket.

Read more »

Value spelt out in orange on wooden blocks on top of each other.
Dividend Investing

7% and 6% dividend yields! 2 ASX value shares on my buy list

A number of quality ASX value stocks have faced recent headwinds as cost of living pressures begin to bite.

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Value Investing

2 ASX All Ords shares to buy delivering 'exceptional cash flows': fund manager

These stocks could be solid picks and pay big income too.

Read more »

Two happy shoppers finding bargains amongst clothes on a store rack
Value Investing

2 ASX 200 value stocks I'd have loved to buy in the August mini-crash

Here are two ASX value stocks that got mighty cheap during August.

Read more »

Value spelt out with a magnifying glass.
Value Investing

Here's how I'd invest $2,000 in ASX value shares right now

I’m going to talk about three different ideas that could be great value.

Read more »

A woman holds up hands to compare two things with question marks above her hands.
Value Investing

Did ASX value shares or growth shares do better in FY23?

Which was the better bet in FY23?

Read more »