2 great value ASX shares I want to buy

These stocks are high on my watchlist.

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I'm always on the lookout for ASX shares that seem too cheap to ignore. Buying great value stocks can lead to outperforming the S&P/ASX 200 Index (ASX: XJO) over the longer term.

Cheap can mean several different things, such as trading at a large discount to the business' net asset value (NAV). In this article, I'll focus on companies that trade on a low price/earnings (P/E) ratio.

I believe the market is materially undervaluing the long-term growth prospects of the below ASX shares.

GQG Partners Inc (ASX: GQG)

GQG is a funds management business based in the US. One of the stock's appealing factors is that it's growing geographically in places like Canada and Australia, expanding its potential customer base.

The company has deliberately set up its funds to have minimal (or no) performance fees, meaning management fees generate the significant majority of its revenue and profit. Therefore, higher funds under management (FUM) is a key driver of earnings.

At 31 December 2023, GQG had FUM of US$120.6 billion. The FUM rose 17.7% to US$142 billion at 30 April 2024, driven by strong investment performance and net inflows of US$6.3 billion for 2024 to date. I'm expecting more inflows over the rest of 2024 with clients attracted to GQG's funds' ability (thus far) to deliver long-term outperformance of their respective benchmarks.

The ASX share has committed to a generous dividend payout ratio of 90% of distributable earnings. Based on the forecast on Commsec, the GQG share price is valued at under 11x FY25's distributable earnings, which looks cheap to me.

Close The Loop Ltd (ASX: CLG)

This company is heavily involved in the circular economy.

It collects, sorts, reclaims and reuses resources and materials that would otherwise go to landfill, such as electronic products, print consumables and cosmetics. Close The Loop also enables the reusing of toner, and utilises post-consumer plastics for an asphalt additive. Finally, the company creates packaging that includes recyclable and made-from-recycled content.

In a world where countries, companies and households are looking to reduce their impact on the planet, this company operates in an attractive area of the economy with growth tailwinds.

The financials are going in the right direction. In the FY24 first-half result, revenue rose 76% to $103.1 million, the operating profit rose 97% to $12.4 million and the operating cash flow increased 105% to $12.3 million. The growth was particularly strong in that period thanks to the acquisition of ISP Tek Services.

The ASX share is beating growth expectations, leading management to upgrade the earnings before interest, tax, depreciation, and amortisation (EBITDA) guidance to between $44 million and $46 million for FY24.

How cheap is it? According to the forecast on Commsec, it's trading at an incredibly low 6x FY25's estimated earnings. I'm looking to buy more Close The Loop shares when I have the capital to do so.

Motley Fool contributor Tristan Harrison has positions in Close The Loop. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Close The Loop. The Motley Fool Australia has recommended Close The Loop. 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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