The ASX share market has seen significant volatility in August, which I believe is opening up attractive opportunities.
There is no guarantee that a share price decline will be followed by a quick price recovery. Therefore, we shouldn't anchor our valuation thoughts about a company to a previous share price.
One of the most important factors for good long-term returns is ongoing revenue/profit growth. That's why I'm excited about the stocks below, particularly at this current lower price.
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Sonic Healthcare Ltd (ASX: SHL)
Sonic Healthcare is one of the world's largest pathology businesses, with significant operations across Australia, the United States, Germany and the United Kingdom.
The Sonic Healthcare share price is down more than 16% since the start of the year.
It's understandable why investors are less excited about the business right now—cost (growth) continues to be elevated amid this inflationary environment. In addition, a number of profit margin improvement initiatives planned for completion in the second half of FY24 have taken longer, which will contribute to earnings growth in FY25.
Pleasingly, revenue growth remains solid, and I think this bodes well for the rest of the year. Organic revenue growth in the four months to April 2024 was 6%. Cost inflation is expected to reduce in FY25, with inflation reduced in its main markets.
According to the estimate on Commsec, the Sonic Healthcare share price is valued at 23x FY25's estimated earnings.
Johns Lyng Group Ltd (ASX: JLG)
This ASX share delivers building and restoration services across Australia and the US. Its core business is based on its ability to rebuild and restore a variety of properties and contents after damage by insured events including impact, weather and fire events.
The Johns Lyng share price is down 12% from 4 January 2024.
In the FY24 first-half result, its insurance building and restoration services (IB & RS) revenue increased 13.7% to $426.1 million and the IB & RS 'business as usual' (BaU) earnings before interest, tax, depreciation and amortisation (EBITDA) grew 28.1% to $55 million. That's a solid margin improvement, in my opinion.
The ASX share continues growing its scale, with expansion in international markets, including its recent contract win in New Zealand with Tower Ltd (ASX: TWR) and a contract win with Allstate in the US (one of the largest insurance businesses in the US).
I'm excited by the company's long-term earnings growth potential, through both organic growth and possible acquisitions.
Centuria Capital Group (ASX: CNI)
Centuria is one of the larger property fund managers on the ASX. It manages various property funds, including Centuria Office REIT (ASX: COF) and Centuria Industrial REIT (ASX: CIP).
There is a lot of pessimism around commercial property at the moment because of the elevated interest rates. However, I believe interest rates will probably come down at some point. Those cuts are getting closer as each month goes by, which could help the Centuria share price materially when it happens.
Excitingly, the ASX share just announced it was investing in a business that can turn suitable empty office space into small but energy-efficient data centres. This can help increase the underlying value of the building and grow revenue.
The Centuria share price is down more than 10% from the start of the year and more than 55% lower from September 2021.
