I think it's a good idea to invest in undervalued ASX shares, as it gives us a greater chance of delivering pleasing returns. Analysts are always on the lookout for ideas that could be attractive and beat the market.
When one analyst thinks a business is a buy, that's interesting. It could be an excellent buying signal if numerous analysts think the business is a buy.
The two ASX shares I'm about to outline are two of the most buy-rated businesses out there.
Coles Group Ltd (ASX: COL)
According to the CommSec collation of analyst opinions on Coles shares, there are currently 10 buys on the business.
Coles runs a national supermarket business as well as a liquor division that includes Coles Liquor, First Choice Liquor Market, Liquorland, and Vintage Cellars.
Coles has a number of advantages compared to many of its competitors, including scale, product range, online delivery, and geographic reach. It's doing so well in fact that its sales growth is currently outperforming Woolworths Group Ltd (ASX: WOW).
One of the brokers that recently reiterated that Coles is a buy is UBS.
UBS noted that Coles is putting effort into vertical integration in priority food categories such as meat, milk, and ready-to-eat meals (Chef Fresh). The facilities are close to and integrated with existing NSW supply chain infrastructure, including distribution centres and customer fulfilment facilities. Coles is confident it can lower end-to-end costs.
The broker noted that meat is at the centre of the plate, a key factor in how consumers perceive value. The facilities have also added shelf life at home. Fresh milk is an "important category in large customer baskets", and Coles has increased shelf life by two days.
UBS also pointed out that 'convenience' meals have grown 20% in the last two years, are an evolving category, and Coles can now innovate more quickly to meet these changing customer needs.
The broker has a price target of $25 for the business, implying a double-digit percentage rise from where it is today (at the time of writing).
Qantas Airways Ltd (ASX: QAN)
Australia's largest airline is another ASX share with numerous buy ratings on the business. There are currently 11 positive recommendations on the business, according to the CommSec collation of opinions.
UBS also rates Qantas as a buy. In its most recent note, the broker highlighted that the Australian international market is expected to grow capacity by 9% year over year. But unless passenger demand keeps pace, this could put pressure on market fares and/or load factors (plane utilisation).
Qantas is adding capacity to mainland US, New Zealand, Singapore, Bali, Thailand, and Hawaii. Jetstar is entering the Philippines.
UBS noted that Qantas is guiding that international RASK (revenue per available seat kilometre) could rise by between 2% to 3% in the first half of FY26, with the broker then projecting another 3% rise in the second half of FY26.
But the broker also noted that domestic demand is proving resilient, with 8% revenue growth expected in the first half of FY26, and the company and industry showing restraint in growing capacity too strongly. Loyalty continues to provide reliable earnings growth.
UBS maintains "some caution" about the rate of cost growth and the "medium term hump" in capital expenditure, which relates to fleet renewal.
The broker estimates Qantas could generate $1.79 billion of net profit in FY26, and it has a price target of $11.50 on the business.
