Although the likes of JB Hi-Fi Limited (ASX: JBH) and Kogan.com Ltd (ASX: KGN) have just seen their shares hit record highs, not all ASX shares are faring as well.
Two ASX shares that are still trading materially lower than their 52-week highs are listed below. Are they in the buy zone?
Bubs Australia Ltd (ASX: BUB)
I became bullish on Bubs earlier this year when it finally became cash flow positive. This appeared to indicate that the infant formula and baby food company had reached an inflection point and the days of dilutive capital raisings were finally over. However, this positive financial performance was only very brief and Bubs was burning through its cash again in the fourth quarter. Bubs reported an operating cash outflow of $6.9 million for the quarter which, combined with other costs, led to the company burning through $10.3 million of cash. This left it with a cash balance of $26 million.
If it continues to burn through cash at this rate then it will not be long at all until it needs to tap the market with yet another dilutive capital raising. And given how the company has just announced its entry into the children’s vitamins market, I suspect that its cash burn could remain high because of the increased investment. In light of this, although the Bubs share price is down 31% from its high, I wouldn’t be in a rush to invest just yet. I would suggest investors wait for clear signs that the cash burn is over before stepping in.
Webjet Limited (ASX: WEB)
The Webjet share price is down a massive 77% from its 52-week high. Investors have been selling the online travel agent’s shares this year after the pandemic brought travel markets to a standstill. In addition to this, a highly dilutive equity raising has also weighed heavily on the Webjet share price.
While I am a big fan of Webjet as a company, I’m still not ready to make an investment. With a market capitalisation of $1.15 billion, I don’t believe it offers a lot of value for money even after its heavy decline. I would suggest investors wait for travel markets to return to relatively normal before parting with your hard-earned cash.
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More reading
- Why Tyro, Virtus Health, Webjet, & Westpac shares are dropping lower
- 2 five-star ASX growth shares to buy in August
- These are the 10 most shorted shares on the ASX
- 5 things to watch on the ASX 200 next week
- 2 ASX shares you could invest $500 into
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO and Webjet Ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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