Value investors should always be on the lookout for cheap ASX shares that may be able to outperform the stock market. After a strong performance by the S&P/ASX 200 Index (ASX: XJO) in recent times, there aren't as many good value ideas as there were in April.
However, I still believe there are plenty of great opportunities worth targeting.
I think some areas of the market are being undervalued considering their outlooks. That's why I really like the look of the following two cheap ASX shares (among others).
National Storage REIT (ASX: NSR)
This is a real estate investment trust (REIT), meaning it owns commercial properties. National Storage says it's the largest self-storage provider in Australia and New Zealand, with over 260 centres providing storage services for more than 97,000 residential and commercial customers.
The business is seeing steady revenue per available metre (REVPAM), which is helping grow the underlying value of the properties. In the first half of FY25, REVPAM increased by 3.5% to $276.1 per square metre.
It's also steadily growing its portfolio. In the first half of FY25, 20 acquisitions totalling $185 million were settled. In addition, seven projects were completed in the first half of FY25, adding more than 49,000 square metres of net lettable area.
The cheap ASX share reported net tangible assets (NTA) of $2.53 per security as of 31 December 2024, up 0.4%. The current National Storage security price is trading at a 9% discount to this value.
The last two distributions declared by the business come to a distribution yield of 4.75%.
Sonic Healthcare Ltd (ASX: SHL)
This ASX healthcare share is a long way below its COVID high – it's down by 43% from December 2021 and since the start of 2024, it has dropped 17%. The business looks compelling to me at this lower price.
The global pathology business is in numerous countries including Australia, Germany, the UK, the USA and Switzerland.
Sonic Healthcare is benefiting from a couple of key tailwinds in its core markets, including growing populations and ageing populations.
The business is working on areas like artificial intelligence and microbiome to help its operations in the coming years. AI in particular could help the company become more efficient and also serve patients better.
In the FY25 half-year result, it reported strong organic revenue growth of 6.1%, with total revenue growth of 8% (which was boosted by acquisitions). It displayed pleasing operating leverage, with operating profit (EBITDA) growth of 12% and net profit after tax (NPAT) growth of 17%.
If the business can continue growing revenue, I'm confident its bottom line can deliver pleasing growth in the coming years.
According to the forecasts on Commsec, the Sonic Healthcare share price is priced at 21x FY26's estimated earnings. FY26 earnings are predicted to grow by around 25% year over year. I think these metrics make this business a cheap ASX share.
