2 cheap ASX 200 shares I'd buy for growth and dividends

These stocks are appealing to me for a few reasons.

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I'm going to talk about two S&P/ASX 200 Index (ASX: XJO) shares that I'm bullish about with their cheap valuations and compelling earnings growth potential.

Businesses that have temporarily dropped can be buy-the-dip opportunities. Stocks that are still growing their operations/revenue have a high chance of rebounding, in my opinion. Share prices usually follow the direction of earnings over time and revenue growth is a very important driver of profit growth.

With that in mind, below are the two ASX 200 shares I like the look of and recently decided to invest in.

Sonic Healthcare Ltd (ASX: SHL)

Sonic is a leading pathology business with operations in numerous countries including the USA, Australia, Germany, Switzerland, UK, Belgium and New Zealand.

Despite being in the defensive sector of healthcare, the Sonic Healthcare share price has dropped 25% in the last year, as we can see on the chart below.

The company is no longer receiving the COVID-19 testing revenue, and it's facing a much higher net interest expense because of higher interest rates and acquisitions.

Why can it keep growing earnings in the long term? There are a number of tailwinds.

Firstly, its base business (excluding COVID-19 revenue) organic revenue growth was 6.2% in the FY24 first half, which I'd say is a solid increase. Total base business revenue rose 15% thanks to acquisitions in places like Switzerland and Germany.

Sonic says that since July 2023, at least A$500 million of new annual revenue has been secured from acquisitions and contract wins.

The company is also expecting to deliver good revenue and margin synergies from recent acquisitions and investments.

I also think the ASX 200 share has tailwinds like ageing populations and growing populations in the key markets of the US, Australia, the UK and Germany.

According to the estimates on Commsec, the Sonic Healthcare share price is valued at 18x FY25's estimated earnings, with a projected dividend yield of 4% (excluding franking credits).

Corporate Travel Management Ltd (ASX: CTD)

Corporate Travel Management is one of the largest global operators. COVID-19 was a rough time for the business, but profit has come soaring back. In the FY24 first-half result, underlying net profit after tax (NPAT) jumped 162% to $57.9 million and statutory NPAT soared 222% to $50.4 million.

Despite that, the Corporate Travel Management share price is down 20% in 2024, as seen on the chart below.

The business is winning new customer contracts and seeing existing customers grow their spending with the ASX 200 share. Since listing in 2010, the business has had a high client retention rate of 97%.

Over the next five years, the business expects revenue to grow by at least 10% per annum. It aims to win $1 billion per year in FY25 and rise to $1.6 billion per year by FY29. Acquisitions (and the acquired revenue) will supplement this.

The company is expecting earnings before interest, tax, depreciation and amortisation (EBITDA) to grow at a compound annual growth rate (CAGR) of 15% thanks to new client wins, retention and project execution.

According to Commsec, the Corporate Travel Management share price is valued at 14x FY25's estimated earnings with a dividend yield of 3.2% (excluding franking credits).  

Motley Fool contributor Tristan Harrison has positions in Sonic Healthcare. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Corporate Travel Management. The Motley Fool Australia has positions in and has recommended Corporate Travel Management. The Motley Fool Australia has recommended Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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