2 ASX industrial shares to buy now

These two stocks could make industrious returns, in my opinion.

| More on:
two men talking in front of a transportation truck

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

When bought at the right price, ASX industrial shares can be solid investments. These companies are typically well integrated into the economy and provide an important service to households, businesses, and often the larger community.

One of the attractive things about businesses in the industrial sector is that they typically trade on a lower price/earnings (P/E) ratio than some sectors, such as technology. But, industrial stocks can still display pleasing qualities such as operating leverage, when things are going well.

When researching companies to invest in today, I look for those with a compelling long-term future and low valuations.

With that in mind, I'm watching the two industrial stocks below that have seen valuation declines.

Lindsay Australia Ltd (ASX: LAU)

The Lindsay share price has declined 27% since March this year, making this business very interesting to me.

The ASX industrial share provides national transport, logistics and rural supply services to the agriculture, horticulture and food-related industries. The company has an "end-to-end solution" for farmers, such as expert agronomy advice, with various services along the supply chain to help farmers grow, package, transport and distribute their produce throughout Australia and the world.

Lindsay is an important part of the Australian economy and transport chain, but it had a difficult FY24 with adverse weather, multiple rail outages and challenging macroconditions. Even so, the company reported like-for-like operating revenue growth of 6% to $717 million and total operating revenue growth of 18.9% to $804.4 million.

The company's underlying net profit fell 17% to $30.4 million, impacted by the higher net finance and depreciation charges of $10 million relating to the $128 million of capital expenditure that the company has invested over the last two weeks.

However, I think operating conditions can improve, its investments will help deliver stronger returns over time, and the company's recently launched transformation program will help improve efficiency and reduce costs.

At the current Lindsay share price, the ASX industrial share is trading at 9x FY24's underlying earnings, with a grossed-up dividend yield of 8% (including franking credits).

Johns Lyng Group Ltd (ASX: JLG)

Johns Lyng specialises in providing repair and restoration services for properties damaged by insured events such as impact, weather, and fire.

The company has a wide range of clients, including large insurance companies, commercial enterprises, local and state governments, body corporates and owners' corporations, and retail customers.

Considering the ASX industrial share's long-term growth prospects, which I'll get to in a moment, I think the company's share price decline of more than 20% since 26 August is attractive and has been overdone.

Johns Lyng sometimes generates sizeable earnings from assisting with the recovery following catastrophe events, but that activity has dropped off over the last couple of years. However, I think it'd be short-sighted to think that the division's earnings are permanently reduced. Hurricane Helene was damaging in the United States recently, and the next 12 months could be unpredictable.

The company's underlying earnings continue to grow at a good pace, which makes me believe the current valuation is appealing for the long term. The company continues to expand its presence in Australia, the US, and New Zealand. I'm optimistic about the possibility of further geographic expansion in the coming years.

The industrial ASX share is expecting its 'business as usual' (BAU) revenue to rise by 25.9% and that BAU operating profit (EBITDA) could rise by 16.3%.

According to the Commsec forecast, the Johns Lyng share price is valued at 22x FY25's estimated earnings.

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

More on Industrials Shares

A female soldier flies a drone using hand-held controls.
Industrials Shares

Will the DroneShield share price ever make it back above $2?

Can it reclaim this spot?

Read more »

Man smiling at a laptop because of a rising share price.
Dividend Investing

Why now presents an 'attractive opportunity' to buy this quality ASX 200 dividend stock

The ASX 200 dividend stock could be trading at a long-term bargain.

Read more »

ETF written in gold with dollar signs on coin.
Industrials Shares

These popular Vanguard ASX ETFs just hit all-time highs. Is it too late to buy?

Here's the rundown.

Read more »

A young male builder with his arms crossed leans against a brick wall and smiles at the camera as the Brickworks share price climbs today
Industrials Shares

Why this ASX 200 dividend heavyweight is marching higher on Tuesday

The ASX 200 dividend stock is shaking off the wider market slide on Tuesday. But why?

Read more »

Shot of a young businesswoman looking stressed out while working in an office.
Industrials Shares

This ASX share is tumbling 13% on reduced earnings forecast

Earnings are expected to fall in the first half, much to the dismay of the market.

Read more »

A businesswoman exhales a deep sigh after receiving bad news, and gets on with it.
52-Week Lows

Down 68% from highs, this ASX 200 stock just hit a 4-year low. Time to pounce?

Is this beaten down stock a buy? Let's see what one leading broker is saying.

Read more »

An older man wearing glasses and a pink shirt sits back on his lounge with his hands behind his head and blowing air out of his cheeks.
Industrials Shares

Have ASX investors fallen out of love with DroneShield shares?

What's in store for the counter-drone player?

Read more »

Woman looking at her tablet at a warehouse.
Mergers & Acquisitions

ASX 200 stock slides on huge $13 billion buyout news

ASX 200 investors are mulling over the $13 billion merger implications on Wednesday.

Read more »