S&P/ASX 300 Index (ASX: XKO) shares that are trading significantly below their 52-week highs can be great buys for the long-term if their earnings are on a strong trajectory.
When business earnings are increasing, it makes it clear that the price/earnings (P/E) ratio is lower and more attractive.
Of course, it's not guaranteed that some companies are going to achieve net profit growth every year. But, if the company is exposed to long-term tailwinds or has significant growth plans, then regular profit growth is more likely to happen.
It's certainly possible that the share prices of the below businesses could drop during reporting season or the following months. However, I believe they're attractive for the price and the expansion I'm expecting.
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Propel Funeral Partners Ltd (ASX: PFP)
Propel is the second-largest funeral operator in Australia and New Zealand. It has more than 200 locations, including 41 cremation facilities and nine cemeteries.
The Propel share price is down by approximately 20% from the August 2024 high.
The ASX 300 share has done a good job at expanding its market share over the past decade, largely through acquisitions. But, its operating net profit is also growing thanks to demographic tailwinds and a rising average price per funeral.
Australia's population is growing and ageing, adding to the demand for Propel's services. According to the company, the total number of deaths is expected to rise at a compound annual growth rate (CAGR) of 2.6% between 2025 to 2030 and then 2.9% between 2031 to 2040.
Not only are funeral volumes growing, but the average revenue per funeral has increased at a CAGR since FY15, helping offset the impacts of the inflation of costs. In the FY25 first half period, the revenue rose 12% and operating net profit increased 21.1% – this demonstrates pleasing operating leverage.
I think the ASX 300 share will be generating a lot more net profit than it is today, so I'd be happy to buy Propel shares today at the lowest price.
Guzman Y Gomez Ltd (ASX: GYG)
Mexican food business GYG is the other business I want to highlight. It has a network of more than 200 restaurants in Australia, as well as small but growing networks in Japan, Singapore and the US.
The ASX 300 share is growing at a rapid pace thanks to both growth at its existing network as well as adding more restaurants. In the third quarter of FY25, total network sales grew 23.6% to $289.5 million, with combined comparable sales growth of 11.1% for Australia, Singapore and Japan.
I'm not expecting tech-like returns from GYG, but if it can continue growing network sales at a double-digit pace, I believe it could deliver pleasing performance when combined with scale benefits and rising profit margins.
There isn't a clear growth ceiling for the business yet, in my view, as it can expand to countries like the UK and Canada.
I think the company is set up to perform well in the coming years, even if there is volatility in the short-term. I believe its profit generation will be much higher in the coming years, making the 35% decline in the last six months more appealing.
