The Australian share market has delivered a return of approximately 10% per annum over the long term.
While that is a great return, investors don't necessarily have to settle for that.
Not when there are ASX 200 shares out there that analysts believe could deliver returns that are far greater than this.
With that in mind, let's take a look at two shares that could be dirt cheap right now:
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James Hardie Industries plc (ASX: JHX)
The first ASX 200 share that could offer material upside over the next 12 months is James Hardie.
This building products giant has been dealing with a tough demand environment in North America, as higher interest rates and softer housing activity weighed on volumes. Despite that, the company's most recent quarterly update signalled that conditions may be stabilising faster than expected.
This caught the eye of analysts at Morgans. They noted that while organic volumes are still declining, the performance was better than feared and could mark a bottoming in the cycle.
Morgans also estimates that James Hardie is now trading on a forward PE ratio of 17x, which it sees as undemanding given the company's strong market position and the potential for earnings to rebound as the US housing cycle improves.
In response to the update, the broker upgraded James Hardie shares to a buy rating with a $35.50 price target. Based on its current share price of $27.60, this implies potential upside of over 25% for investors.
ResMed Inc (ASX: RMD)
Another ASX 200 share that could rise strongly from current levels is ResMed.
The sleep and respiratory care giant helps millions of people manage sleep apnoea and related conditions. Its technology not only improves quality of life but also reduces healthcare costs, which is a powerful combination that has helped ResMed become a global leader in its field.
The company continues to grow thanks to its recurring revenue model, driven by the sale of masks, accessories, and cloud-connected devices. Its digital health platform, which monitors patient adherence, also provides valuable data that strengthens relationships with healthcare providers and insurers.
And after a period of share price weakness, the stock now looks very attractively priced. Macquarie, for example, has an outperform rating and $49.20 price target on its shares. Based on its current share price of $37.81, this implies potential upside of 30% for investors over the next 12 months.
But it isn't just about the next 12 months. Given its strong cash flow, robust balance sheet, and expanding pipeline of digital health innovations, ResMed could be a business to own for decades.
