ASX shares haven't been uniformly kind lately. Many high-quality companies have been pulling back and leaving some fundamentally sound businesses trading at valuations that resemble discounts rather than growth premiums.
From tech-enabled marketplaces to global gaming and beaten-down fund managers. Stocks such as REA Group Ltd (ASX: REA), Aristocrat Leisure Ltd (ASX: ALL), and GQG Partners Inc (GQG) all lost 25% or more in the past 12 months.
At the current levels, these 'cheap' ASX shares offer potential long-term upside, if you're willing to look past short-term volatility and broader market headwinds.
REA Group Ltd (ASX: REA)
The ASX share pulled back from recent highs and has declined around 28% over the past year, even as the underlying digital real estate business continues to grow. REA Group owns and operates realestate.com.au, Australia's dominant online listing marketplace.
It's a business with pricing power and strong cash flow that has historically compounded returns for long-term holders. Recent quarterly results showed revenue and EBITDA growth, driven by yield increases even as property listings softened.
A key strength is its market leadership and recurring services. However, regulatory scrutiny and high valuation multiples relative to historical averages could cap near-term gains. If Australia's housing market regains momentum or REA executes on AI-driven tools, sentiment around this ASX share could turn. It would make its current weakness a potential entry point.
Aristocrat Leisure Ltd (ASX: ALL)
The valuation and risk profile of Aristocrat Leisure have come under pressure. It has put the ASX share on cheap screens relative to longer-term growth history.
Sales and revenue were mixed, with recent softness prompting share weakness despite record deployments and recurring earnings from digital gaming segments.
The company operates globally across land-based casino machines and digital/mobile gaming, a diversification that's a structural strength as consumer preferences shift. But cyclical exposure to gaming spend, regulatory risks in key markets, and FX headwinds can make earnings lumpy.
Aristocrat's disciplined capital management — including buybacks and debt reduction — supports earnings quality. Mergers and acquisitions, optionality, and online game portfolio expansion could re-rate multiples if growth stabilises.
Investors looking for growth plus some defensive earnings might find the current price range appealing, but patience is key.
GQG Partners Inc (ASX: GQG)
This ASX share has been one of the more beaten-down names. GQG Partners' share price is down almost 25% over the past year as investor flows fluctuated and performance lagged some benchmarks.
The global active asset manager reported double-digit revenue and net profit growth, but net inflows declined, which spooked sentiment. GQG's strengths include a diversified global investment franchise, high margins, and generous dividends, with a payout often cited among sector highs.
Weaknesses include sensitivity to fund flows and periods of underperformance in defensive portfolios, which compresses assets under management and fees. However, brokers like Macquarie see potential catalysts that could drive a recovery from depressed valuations.
For value-oriented investors willing to tolerate volatility, the ASX share's current setup may offer compelling risk-reward.
