2 undervalued ASX shares I'm looking to buy in 2025

I think these stocks have plenty of potential.

| More on:
Two happy shoppers finding bargains amongst clothes on a store rack

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

There are some great ASX shares available to investors that I think look undervalued. These companies appear very cheap for how much they could grow in the coming years.

We can use at least two different methods to decide if a business is cheap. First, we can look at the size of the price/earnings (P/E) ratiothe multiple of earnings that the business is trading at. The other option is to find a company trading at a significantly lower price than its stated underlying value on the balance sheet.

Here's one example of each type of undervalued business that I'm looking to buy in 2025.

GQG Partners Inc (ASX: GQG)

This funds management business offers a variety of investment funds focused on US shares, global shares, international shares and emerging market shares. It also offers dividend share strategies.

The GQG share price has dropped 37% over the past six months. It is significantly cheaper after uncertainty relating to its Adani investments.

Now is the time for the fund manager to prove its capabilities and show its clients it can continue its long-term investment track record of outperformance of the respective funds' benchmarks. I believe it can, which should encourage client net flows to recover.

The organic long-term growth of the share market could help increase GQG's funds under management (FUM), even if the ASX share's net flows aren't as positive in the short term.

I think the market is being overly negative about the ASX share. According to the forecast on Commsec, the GQG share price is valued at 8x FY25's estimated earnings, with a forward dividend yield of 11.5%. That looks very cheap to me.

Charter Hall Retail REIT (ASX: CQR)

This real estate investment trust (REIT) describes itself as a leading owner of property for convenience retailers. It has more than 40 shopping centre retail assets around the country.

Major tenants — including Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL), BP, Wesfarmers Ltd (ASX: WES), Ampol Ltd (ASX: ALD), Endeavour Group Ltd (ASX: EDV) and Aldi — accounted for around 55% of portfolio income.  

I like the portfolio statistics, which display strength. At June 2024 the REIT had an occupancy rate of 98.8% and a weighted average lease expiry (WALE) of 7.2 years.

Despite high interest rates, it expects to deliver like-for-like net property income growth in FY25. And it expects to pay a distribution per unit of 24.7 cents, which translates into a distribution yield of 7.8%.

Its net tangible assets (NTA) was $4.51 at 30 June 2024, so the current Charter Hall Retail REIT share price is trading at an approximate 30% discount to its underlying value. A possible RBA interest rate cut this year could increase customer visitation at the shopping centres and also help the ASX shares' valuation.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Coles Group. The Motley Fool Australia has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Cheap Shares

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Cheap Shares

Buying AFIC shares? Here's what you actually own

AFIC shares are currently trading well below their value.

Read more »

A woman looking at her watch representing need to buy ASX shares urgently.
Cheap Shares

Is this the last chance to grab these cheap ASX shares at a discount?

These buy-rated shares may not be cheap for long according to analysts.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Cheap Shares

Where to find the 'cheapest' shares on the ASX

Where should investors look for opportunities right now?

Read more »

A couple sit in their home looking at a phone screen as if discussing a financial matter.
Cheap Shares

2 ASX shares trading below book value

These stocks could be bargains with cheap valuations.

Read more »

A man and a woman sit in front of a laptop looking fascinated and captivated.
Cheap Shares

Can ASX 200 shares be a bargain even after the index hit a new record?

Sometimes it can be good to 'buy high'.

Read more »

Two men laughing while bouncing on bouncy balls
Opinions

Why I think these 2 ASX shares are bargain buys

In the world of quality cyclical shares, what goes down typically will bounce back up again.

Read more »

A balance sheet and calculator for assessing a company or individual's financial position
Cheap Shares

7 beaten-up ASX shares with 'strong balance sheets'

In a sea of green, there are plenty of cheap stocks still out there.

Read more »

Close-up of a business man's hand stacking gold coins into piles on a desktop.
Cheap Shares

Time to buy? One Australian stock that hasn't been this cheap in years

This blue chip is trading close to a record low. Here's why Goldman thinks it could be the time to…

Read more »