I love finding compelling ASX shares that could deliver solid capital growth.
The ASX share market and global stock market have come roaring back after the US tariff volatility. But some businesses are still trading far below their 52-week lows. I think they could be opportunities because the longer term looks compelling after the decline.
Something isn't necessarily a buy just because it has fallen, but I believe the two businesses below are compelling ASX shares.
Propel Funeral Partners Ltd (ASX: PFP)
Propel describes itself as the second-largest private provider of death care services in Australia and New Zealand. It currently operates from 202 locations, including 40 cremation facilities and nine cemeteries.
As the chart below shows, the Propel share price has dropped 23% since September 2024.
That decline has occurred despite the funeral provider reporting strong financial progress in its results.
In the first six months of FY25, the company reported revenue rising by 12% to $115.2 million. This was helped by an 8.6% rise in funeral volumes and 2.6% organic growth of Propel's average revenue per funeral to $6,727.
The operating net profit after tax (NPAT) increased by 21.1% to $12.2 million. I think this showed the strength of its operating leverage, where the business can deliver higher profit margins, enabling the bottom line to rise much faster than revenue. I think that's an important factor making it a compelling ASX share.
In January 2025, revenue rose by more than 10%, and the long-term outlook for growth looks promising.
Death volumes are expected to increase by an average of 2.8% per annum from 2025 to 2035 and then rise by an average of 2.4% per year between 2036 to 2045, which is an ultra-long-term tailwind.
Audinate Ltd (ASX: AD8)
Audinate is a business focused on AV (audio visual). Its Dante IP networking solution is the worldwide leader and is reportedly used extensively in the professional live sound, commercial installation, broadcast, public address, and recording industries.
The company's recent financial performance has supposedly been impacted by its manufacturing customers working through accumulated inventory balances, leading to a dampening in short-term demand for its hardware chips, cards and module (CCM) products.
As the chart below shows, the Audinate share price is down 57% in the last 12 months.
Audinate expects those trading conditions to persist in FY25, but it expects a return to more typical order patterns in FY26 as inventory levels normalise.
The company's software revenue is helping plug a bit of the gap. Growth has also been supported by existing customers transitioning from hardware CCM products to embedded software Dante solutions.
Pleasingly, the software revenue has a much higher gross profit margin. So, while the HY25 revenue fell 38% to US$18.9 million, the gross profit only declined 29% to US$15.5 million following a rise in the gross profit margin to 82.2% (up from 71.5%).
The business noted that the FY25 second quarter's gross profit exceeded the first quarter, with a moderate strengthening expected in the second half. A return to growth would be promising, in my view.
Assuming hardware sales do improve in FY26, the Audinate share price could be materially undervalued. Otherwise, the ongoing success of the software segment would still make this a compelling ASX share, though the recovery could take longer.
