With just a few days left in February, the ASX remains near record highs. But once again, those highs are being driven by a relatively narrow group of stocks.
Away from the banks and major miners, a number of quality names have been sold off heavily over the past year. In my view, some of that weakness looks overdone.
Here are five oversold ASX shares I would be looking at before the end of February.
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Xero Ltd (ASX: XRO)
Xero has been caught up in the broader sell-off across global software stocks.
Concerns around valuation, artificial intelligence (AI) disruption, and slowing growth have weighed on sentiment. But when I look at the business itself, I still see a high-quality subscription model with sticky customers and strong recurring revenue.
Xero continues to expand internationally and improve margins. If earnings and subscriber growth continue, I think its share price could be due to a major re-rating.
Zip Co Ltd (ASX: ZIP)
Zip has had a volatile journey over the past few years.
After scaling aggressively during the buy now, pay later boom, the company has since tightened credit settings, exited weaker markets, and focused on profitability. The share price has reflected both extremes of sentiment.
To me, this now looks like a more disciplined business. If execution continues to improve and losses remain under control, I believe the market could reassess its long-term earnings potential.
Telix Pharmaceuticals Ltd (ASX: TLX)
Telix has delivered strong commercial growth, yet its share price has pulled back significantly from recent highs on US FDA product approval delays.
The company continues to expand its precision medicine franchise while investing heavily in its therapeutic pipeline. Revenue growth has been robust, and guidance for further growth in FY26 remains in place.
When a high-growth healthcare business with commercial traction trades below prior peaks, I start to pay attention. I think the recent weakness may offer an opportunity for patient investors.
Block Inc. (ASX: XYZ)
Block's Australian-listed shares have also been sold off amid broader tech weakness.
Digital payments and fintech remain competitive and fast-evolving industries. But Block still has a strong ecosystem across payments, point-of-sale solutions, and consumer finance.
If growth stabilises and margins improve over time, the current share price could look overly pessimistic. For investors willing to accept some volatility, I see potential upside from here.
REA Group Ltd (ASX: REA)
REA has faced pressure due to softer property listings volumes, broader market caution, and AI disruption fears.
However, the company's dominant position in Australian online property advertising remains intact. It has pricing power, strong brand recognition, and high-margin digital operations.
While short-term listing volumes can fluctuate, the long-term shift to digital property search is not reversing. If volumes recover even modestly, earnings could rebound more quickly than the market expects.
Foolish takeaway
Oversold does not automatically mean undervalued. Sometimes shares fall for good reasons.
But I think Xero, Zip, Telix, Block, and REA each represent cases where sentiment may have swung too far to the downside relative to long-term business quality.
