During routine analysis on the weekend, 2 absolute fantastic S&P/ASX 200 Index (ASX: XJO) shares jumped out at me. I had previously written these off as far too expensive and turned my attention elsewhere. Both of these ASX 200 value shares have been among the best performing shares of the decade, increasing their share price by at least 10 times in the past 10 years.
This is a unique window in time where shares of this calibre are available at what I believe are discount prices.
Altium Limited (ASX: ALU)
Between 2010 and now, Altium has been one of the outperforming ASX 200 value shares, with its share price returning over 146 times the initial investment. That means a $10,000 investment 10 years ago would have become over $1.4 million today. This is not a company that is built on smoke or vapour – Altium develops software for the printed circuit board (PCB) design industries.
Over a 10-year period, it has achieved compound annual growth rates (CAGR) that are the envy of most organisations. It is clear Altium is a company built on solid technological foundations, managed with steel-like discipline. This includes a 10-year sales CAGR of 16.4%, an 8 year earnings per share (EPS) CAGR of 30.3%, and a cashflow CAGR of 39.3%. Over the past 5 years, using a USD to AUD conversion rate of $0.72, the company has an average return on capital employed (ROCE) of 20%.
This is an organisation that knows how to turn capital into profits.
The company is sitting on a current price-to-earnings (P/E) ratio of 60, which immediately sounds high. It is way over the company’s 10-year average P/E of 23. However, when you factor in the compound growth rates I have mentioned with a horizon of 10 years, then the share price appears to be at a discount.
Personally, even if it was selling at a small premium I would be interested in owning this ASX 200 value share. Even with the recent hit from the coronavirus, it clearly has a long runway ahead of it.
Domino’s Pizza Enterprises Ltd. (ASX: DMP)
Everyone knows Domino’s. Most readers have probably bought from Domino’s. We know the taste, the buying experience, the usefulness of the app. And for many of us, we know that we automatically choose Domino’s Pizza. It isn’t a thought-through process. This is what makes it one of the great ASX 200 value shares.
Like Altium, Domino’s was an outperforming share during the past decade, returning 12 times the initial purchase price. It has a sales CAGR of 21.9% and shows no signs of slowing, with last years sales growth exceeding that of the previous 2 years. Its 10-year cashflow CAGR is 22.3% and it has a 10-year EPS CAGR of 21.4%. Also like Altium, the company has demonstrated an ability to turn capital into profits, averaging a ROCE of 19% over the past 4 years.
On paper, its P/E is 39.16. That’s 9 points higher than its 10-year average. However, over a 10-year investing horizon and based on the above CAGRs, I believe it is selling at a discount.
Foolish takeaway
When searching for ASX 200 value shares it is important to dig a bit deeper than the initial summary statistics. If you were to look at headlines and P/E ratios alone, you will never have a full measure of an organisations true worth.
NEW! 5 Cheap Stocks With Massive Upside Potential
Our experts at The Motley Fool have just released a FREE report detailing 5 shares you can buy now to take advantage of the much cheaper share prices on offer.
One is a diversified conglomerate trading 40% off it’s all-time high, all while offering a fully franked dividend yield of over 3%…
Another is a former stock market darling that is one of Australia’s most popular and iconic businesses. Trading at a significant discount to its 52-week high, not only does this stock offer massive upside potential, but it also trades on an attractive fully franked dividend yield of almost 4%.
Plus, this free report highlights 3 more cheap bets that could position you to profit in 2020 and beyond.
Simply click here to scoop up your FREE copy and discover the names of all 5 cheap shares.
But you will have to hurry because the cheap share prices on offer today might not last for long.
More reading
- The ASX 200 just hit an 11-week high. Here are 3 reasons we might be in overvalued territory
- What ASX investors can do before 30 June to save tax
- The ASX 200 stocks in the tax-loss selling firing line
- Why didn’t Warren Buffett buy more shares in the recent bear market?
- ASX 200 up 1.8%: Big four banks jump higher, Flight Centre and Webjet rocket again
Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited. 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.
The post 2 unbelievable ASX 200 value shares to buy today appeared first on Motley Fool Australia.
from Motley Fool Australia https://ift.tt/2TDcVKK
Leave a Reply