Some of the best S&P/ASX 300 Index (ASX: XKO) shares to buy are ones that we can hold for the long term.
If we give our investments a long timeframe to achieve returns, it gives the company more time to carry out business plans and can enable the power of compounding to work its magic.
We can then ask ourselves the question: Which companies might be undervalued because of the potential profit they can generate in the coming years?
From the list of ASX 300 shares, I think there are three stocks that could generate stronger profits in the short term and long term (and are not overpriced for that potential). Let's explore.
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Tuas Ltd (ASX: TUA)
Tuas is a relatively new, rapidly growing business based in Singapore. It's led by David Teoh, who helped grow TPG Telecom Ltd (ASX: TPG) from a small business into the large telco it is today.
The ASX 300 share has already built an impressive presence in Singapore, with more than 1 million active mobile subscribers at the end of FY24. Excitingly, the business also expects to grow in the home broadband space, where it had around 4,000 subscribers at the end of FY24. There is reportedly strong consumer interest in the broadband segment.
During its listed life, Tuas has demonstrated exactly what I want to see – rising revenue, increasing profit margins and expectations of a positive net profit after tax (NPAT) (in FY25).
Why is it such a good buy-and-hold idea? Tuas has already shown it can succeed in one Asian country. I think it will eventually expand to other countries with larger populations, such as Malaysia and Indonesia. This could help the business unlock strong revenue potential and scale benefits.
Lovisa Holdings Ltd (ASX: LOV)
Lovisa is one of the most promising retail shares on the ASX, in my opinion. It offers affordable jewellery with a focus on younger shoppers. The company has a global store network in numerous countries.
I think now could be an opportune time to look at this ASX 300 share, considering its share price has fallen more than 20% since mid-October.
Lovisa has impressed me with its ability to take its offering global and be so successful with it.
At the end of FY24, Lovisa had more than 10 stores in each of the following countries: Australia, New Zealand, Singapore, Malaysia, South Africa, the United Kingdom, France, Germany, Belgium, Poland, the United States and Canada. It grew its store count in nearly all of those countries.
The company also has fewer than 10 stores in several compelling markets, including China, Vietnam, Spain, the Netherlands, Austria, Romania, and Mexico. I think there's a lot of potential to grow its store count in existing and new markets.
FY24 saw Lovisa grow revenue by 17.1% to $698.7 million. Net profit grew even faster, increasing 20.9% to $82.4 million.
With more stores in more countries, I predict that this business can become much larger in the next five to 10 years.
Telstra Group Ltd (ASX: TLS)
Telstra is the largest telco business in Australia, with the most mobile subscribers and the widest network coverage. It also makes the biggest profit among its peers.
I'm not sure what Australia's shopping habits will be like in 20 years, what the energy generation will look like and so on. But, I do think Australia will still need data transmitted by a company like Telstra, whether that's with 6G technology, 7G or something else.
This ASX 300 share has a current advantage that I think it can continue to uphold with continued investment in its infrastructure.
If Telstra succeeds in getting a growing number of households to sign up for wireless 5G-powered home internet as their broadband choice, it could transform its profit. This would enable Telstra to capture back a lot of the margin lost to the NBN.
During the ownership of Telstra shares, investors could also receive pleasing dividend income. It currently offers a grossed-up dividend yield of around 6.5% (including franking credits).
