I love investing in undervalued businesses with excellent growth potential. There are a few S&P/ASX 200 Index (ASX: XJO) shares that are trading a lot cheaper compared to recent times that I believe are great buys.
ASX tech shares are some of the most compelling ideas because of their ability to achieve high profit margins and grow revenue at a fast pace.
Recent results highlight to me what attractive buys the following three businesses are.
Xero Ltd (ASX: XRO)
Xero is one of the world's leading accounting software businesses, with a presence in numerous countries including Australia, New Zealand, the UK, the US, Canada, Singapore and South Africa.
The Xero share price has fallen by roughly a third over the past year, despite reporting a solid set of numbers in the FY26 first half result, with 20% operating revenue growth, 42% net profit growth and 54% free cash flow growth.
It's benefiting from a growing, loyal subscriber base that (based on the low subscriber churn rate) appears to love the tools Xero offers to save time and operate the business more efficiently. With a rising average revenue per user (ARPU) and growing profit margins, there's a lot to like about this business with global growth aspirations.
I believe this ASX 200 share could make significantly more profit in the next five years.
TechnologyOne Ltd (ASX: TNE)
TechnologyOne is a global enterprise resource planning (ERP) software business that has customers like companies, local councils, universities, government entities and so on.
The company has been a success story over the last five years and I think there's a lot more growth to come. It has a goal of a net revenue retention (NRR) of 115%, meaning it wants to grow its revenue by 15% from its existing client base each year, thanks to its significant investment (25% of revenue) in improving the software.
This ASX 200 share is expecting rising profit margins thanks to its software as a service (SaaS) business model. It's also expecting to significantly grow its annual recurring revenue (ARR) in the coming years, with a $1 billion ARR target by FY30.
If the business is successful at winning more customers in the UK and continuing its NRR track record, the tech stock has a very exciting future. In FY25, it reported total ARR grew 18% to $554.6 million, it revealed NRR of 115% and net profit before tax increased 19% to $181.5 million.
REA Group Ltd (ASX: REA)
REA Group is the owner and part-owner of numerous businesses related to property in Australia, as well as having investments in the Asian and the US property industries.
The main business for REA Group is realestate.com.au, which saw 111.4 million more monthly visits than the nearest competitor on average in the first quarter of FY26.
This advantage over its nearest rival gives REA Group strong pricing power and the ability to deliver stronger profit margins.
The FY26 first quarter saw the business deliver revenue growth of 4% and free cash flow growth of 16%, showing the power of its financials.
In five years, I'm expecting the company to be making significantly more profit, particularly if it's able to continue growing its revenue. Despite that, it has dropped by approximately a quarter in value since August 2025, making it much better value.
