2025 has proven difficult for several beaten-down ASX shares. After the broad market selloff in February, much of the market has yet to recover in full.
But this has opened the funding window to own passive interests in high-quality Australian businesses at a reasonable price.
That's the view of Macquarie analysts' in the investment bank's small-to-mid-cal (SMID) best picks for March 2025.
The report highlights G8 Education Ltd (ASX: GEM), Integral Diagnostics Ltd (ASX: IDX), and IPH Ltd (ASX: IPH) as buys after being heavily sold in recent weeks. Let's dive in.
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Beaten down ASX shares in favour
Macquarie laid out several beaten down ASX shares in its report, including G8 Education. The early education centre operator has had a tough time this month, with shares down 5% from February highs.
Macquarie expects continued operating margin expansion in 2025 from G8, noting it has already seen a 1.2% margin growth in 2024
We expect further expansion of +70bps in CY25 will be driven by remaining procurement initiatives and divestments (MRE 8/13 flagged). Outer-year margins could see upside if: 1) occupancy increases; 2) pricing growth remains above inflation past CY26; and 3) GEM's footprint expands.
The broker also notes the recent 10% government funded pay increase for centre staff, with another 5% to come later this year.
It rates the beaten down ASX share a buy at $1.60 apiece. G8 closed at $1.29 on Monday.
Integral Diagnostics is another beaten-down ASX stock on Macquarie's list. The healthcare services company is down 21% this year, after its shares sunk in February on the back of its H1 FY25 numbers. It closed at $2.31 on Monday.
But Macquarie sees "several revenue tailwinds" this coming year, "supported by MRI deregulation and CT uplift from (its) lung screening programme."
MBS indicates strong start to 2H25 with benefits growth of +10% and volume +5% vs pcp. We expect revenue growth of ~7.5% in 2H25.
IDX's recent merger with CAJ is also expected to drive cost synergies, supporting operating margins in the future. The investment bank projects $8 million in cost savings this year thanks to lower employee costs.
It rates the beaten down ASX share a buy at $3.20 apiece.
IPH: 'Fundamentally cheap'?
The broker also rates IPH a buy and expects "a number of factors to support 2H25 earnings" which could see the stock trade higher.
IPH is down 11% this year and down nearly 28% in the past twelve months, falling from highs of $6.48 in August last year. It closed on Monday at $4.46.
The beaten down ASX stock is "fundamentally cheap", according to Macquarie, after the business beat its estimates in H1 FY25.
IPH's Canadian operations are expected to generate $4.5 million in annualised savings at the current run rate as well. This is bullish long-term for the company:
Longer term, sustained performance requires positive filing activity/improved market share in Australia, as well as underlying Asian and Canadian segment growth. PCT filing activity in the US turning positive would be well-received by investors.
Foolish takeaway
This broker is bullish on these beaten down ASX shares and sees long-term opportunities after the recent selloffs.
Macquarie also sees each name as high quality, seeing as they passed a number of screens. Time will tell if the broker's convictions are right into the future.
