After seeing their reports, I think these 2 ASX 300 shares are buys

August can be a really interesting month because it’s reporting season. It gives us the opportunity to look into how businesses have been performing over the last six or twelve months.

After seeing some numbers, it could mean that a few S&P/ASX 300 Index (ASX: XKO) shares are worth looking at.

Just because a business reports growth in its result doesn’t mean that investors will push the share price higher. Generally, it’s only when the result is a surprise that share prices move substantially (either higher or lower).

There is more to a result announcement than what has already happened. Businesses usually give comments about the new financial period as well. Having looked at their results, I’m feeling positive about the outlook for these two ASX 300 shares:

Baby Bunting Group Ltd (ASX: BBN)

Baby Bunting is a retailer with large format stores that sell lots of things that a baby or toddler might need such as clothes, furniture, prams, car seats, and so on.

I thought the company’s FY22 result was solid, with sales growth of 8.3% to $507.3 million and statutory net profit after tax (NPAT) growth of 14.6% to $19.5 million. It also grew the full-year dividend by 10.6% to 15.6 cents per share.

During the year, the company opened four new stores. It’s now planning to open 110 stores in Australia (previously the plan was 100 stores), as well as more than 10 stores in New Zealand.

The ASX 300 share is also working on establishing a Baby Bunting marketplace that will facilitate ‘first party’ drop ship sales and the sale of third-party products. The marketplace is expected to launch in the second half of FY23.

A growing store network, rising sales, and rising profit margins offer an attractive outlook in my opinion. The company is expecting to open at least six new stores in Australia in FY23 as well as a second store in New Zealand. Although comparing against a lockdown period, the company was able to say that total sales had grown by 19.3% in FY23 to date to 10 August 2022.

According to the broker Macquarie, the Baby Bunting share price is valued at 20 times FY23’s estimated earnings after an 18% fall in 2022.

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is a leading online retailer of furniture and homewares. It also recently launched ‘The Build’, an onlin site specifically for renovation projects. The plan here is for it to be a leading seller of home improvement products to Aussies.

The company has seen an enormous uplift in sales since the start of the COVID-19 pandemic. FY22 revenue was $426.3 million – up 31% compared to FY21 and up 142% compared to FY20. It managed to achieve an earnings before interest, tax, depreciation, and amortisation (EBITDA) margin of 3.8% despite a $1.7 million investment in The Build.

An increase in profitability looks like a good development to me. Management expects the FY23 EBITDA margin to be between 3% to 5%. Inventory levels in FY23 are “strong” and all metrics are in line, or better than, internal targets.

While August trading showed sales were down 17% year on year, they were ahead of internal estimates.  As well, “month-to-month seasonality suggests a return to double-digit growth during FY23” once sales have finished being compared against lockdown figures from the year before.

I like the bullish and optimistic sentiment of the company when it said:

We remain committed to our profitable growth strategy. We’re confident we have the people, platforms, brand and business model to achieve our goal of becoming Australia’s largest retailer of furniture and homewares.

The Temple & Webster share price has zoomed higher over the past month. But, since the beginning of 2022, it has plunged over 50%, so I think it looks much better value.

The post After seeing their reports, I think these 2 ASX 300 shares are buys appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group Ltd. The Motley Fool Australia has recommended Baby Bunting and Temple & Webster Group Ltd. 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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