For a long time, growth at a reasonable price, or GARP, was probably the investment style I was most naturally drawn to.

This meant finding ASX shares capable of growing earnings at attractive rates, but avoiding paying a price that assumes too much of that growth in advance.

I still like that approach. But these days, I prefer quality at a reasonable price, or QARP.

With GARP, growth tends to be the starting point. With QARP, I start with the quality of the business.

I want ASX shares with strong competitive positions, attractive economics, healthy balance sheets, good cash generation, and the ability to keep reinvesting for years. Only then do I ask whether the valuation leaves enough room for an attractive return.

Why the shift? Because growth can disappear quickly. A fast-growing company can slow or lose market share. A genuinely high-quality business has a better chance of handling setbacks and continuing to create value.

That does not mean valuation becomes less important. A wonderful business can still be a poor investment if its share price already assumes a near-perfect future.

So, I recently screened the ASX 200 looking for shares offering both quality and a valuation I believe can still support attractive long-term returns.

Five stood out.

CAR Group Limited (ASX: CAR)

The first is CAR Group. I think this ASX share is a very good example of what I mean by QARP.

It operates leading automotive marketplaces across Australia and several international markets, giving it strong local economics and a longer runway offshore.

One of its biggest strengths is its network effects. Buyers gravitate towards marketplaces with the most listings, while sellers want to advertise where the buyers already are. Once that position is established, it becomes difficult for a new competitor to recreate the same audience.

CAR Group can then use that position to improve monetisation, launch new products, and grow internationally without requiring the physical capital many traditional businesses need.

I also like that the investment case is no longer resting on Australia alone. Its businesses in the United States, Brazil, and South Korea give the group several avenues for expansion.

Weaker economic conditions could reduce vehicle activity. But I think the strength of the platform, its cash generation, and its international opportunity make CAR Group a compelling long-term investment option.

And despite making my final five, it was not the opportunity that stood out most from the screen.

The remaining four include ASX shares where I think the market may be underestimating the quality or recovery potential, as well as one name that I believe currently offers the best overall QARP setup of the group.

CSL Ltd (ASX: CSL)

CSL is probably the clearest example here of a high-quality business that has fallen out of favour.

The biotechnology giant has disappointed investors in recent years. Execution has not always matched expectations and margins have faced pressure.

But I think the key question is whether those issues have permanently damaged the underlying business.

The good news is that I don’t believe they have.

CSL Behring has enormous scale in plasma collection and the manufacture of therapies used to treat serious and often rare diseases. It also has decades of expertise and a global collection network that would be extremely difficult to replicate.

Demand for many of its therapies is relatively resilient.

A recovery may not be immediate, but at a touch over 17 times estimated FY 2029 earnings, I think the share price now reflects far more caution than it once did.

If management can improve execution and margins while underlying demand keeps growing, CSL could offer strong returns from here.

Goodman Group (ASX: GMG)

Goodman Group is another ASX share that I think deserves its reputation for quality.

It is often described as an industrial property group, but that does not really cover the full opportunity.

Goodman specialises in securing land, power, planning approvals, and development opportunities in locations where major customers want logistics and digital infrastructure.

That has become incredibly valuable as demand for data centres has accelerated.

Artificial intelligence (AI) and cloud computing require enormous amounts of computing capacity, which is creating demand for sites with access to power and major population centres.

Goodman’s footprint and development expertise give it an advantage, while its partnership model allows it to keep recycling capital into new opportunities.

Its shares rarely look cheap and expectations around data centres are already high. But I think recent share price weakness has created an attractive entry point.

REA Group Ltd (ASX: REA)

REA Group is another ASX share that oozes quality.

Its realestate.com.au platform has an exceptionally strong position in the Australian property market.

Buyers want to search where the largest number of properties are listed, while agents and vendors want to advertise where the buyers are. That creates a powerful network effect and makes the platform difficult to displace.

REA also benefits from attractive economics. Advertising a property can represent a small percentage of a transaction’s value, yet reaching the largest pool of buyers is highly important to the seller. That gives the company significant pricing power.

Listings will still rise and fall with the housing cycle. And with interest rates rising, the cycle is certainly going through a tough stretch.

But for a long-term investor, I think the bigger consideration is whether REA will still be central to how Australians search for property in another decade.

I believe it will. That is why, despite a valuation that is unlikely to look conventionally cheap, I still think REA can fit within a QARP framework.

ResMed Inc (ASX: RMD)

The final ASX share is ResMed.

Of the five, I think this one currently offers the strongest combination of quality, valuation, and expected return.

ResMed is a global leader in devices, masks, and software used to treat sleep apnoea.

What I like most is that the company still has a huge market opportunity even after decades of growth. Sleep apnoea already affects a huge number of people, but the vast majority remain undiagnosed or untreated.

As diagnosis improves and treatment rates rise, ResMed stands to benefit from more patients entering the system.

There is also an attractive recurring element to the model. Masks and other consumables need replacing, creating ongoing demand.

At around 19 times estimated FY 2027 earnings, I think its valuation is compelling relative to the quality of the business and the runway ahead. That is what I want from a QARP investment.

Final word

I am not trying to find the cheapest shares on the ASX. 

I would much rather own a great business at a sensible price than an average one simply because its shares look inexpensive.

CAR Group, CSL, Goodman, REA, and ResMed all meet that test for me in different ways.

The post I screened the ASX for quality and value. These 5 shares stood out appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in CSL, Goodman Group, REA Group, and ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Goodman Group, and ResMed. The Motley Fool Australia has positions in and has recommended Goodman Group and ResMed. The Motley Fool Australia has recommended CAR Group Ltd and CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you are looking for outsized returns and have a higher than average risk tolerance, then it could be worth looking at the ASX stock in this article.

That’s because the team at Bell Potter believes it could deliver a return that is materially better than the market average.

Which ASX stock?

The stock that Bell Potter is recommending to clients is Electro Optic Systems Holdings Ltd (ASX: EOS).

It is an Australian defence manufacturer specialising in advanced weapon systems and satellite tracking technology.

Bell Potter notes that the company has secured its largest ever contract after entering into an agreement with the government of a Middle Eastern Gulf state. It commented:

EOS has entered into an agreement with the government of a Middle Eastern Gulf state (GCC member) for a nation-wide counterdrone (C-UAS) defence system valued at £370m (~$700m). This represents the largest contract ever secured by EOS. EOS is acting as prime contractor and systems integrator, deploying a cellular nation-wide system with MARSS’ AI-enabled NIDAR C2 platform at its core. The scope includes third-party sensors (electro-optical, radar, sonar) to feed data into central command centres, as well as initial third-party effectors (hard-kill kinetic interceptors and soft-kill jammers). 

EOS expects over 80% of contract revenue to be earned over the initial 12-24 months after the contract becomes unconditional. ~20% of total contract value relates to ongoing support over a 4-year period. Conditions include: Provision of a £37m performance bond, secured by a £40.3m cash security deposit (posted by EOS in August 2026); EOS providing a £74m bank guarantee, matched by an advance payment paid by the customer to EOS; and obtaining relevant export licences for system components within two months of receiving necessary documentation from customer.

In response to this news, Bell Potter has boosted its earnings per share estimates materially. It adds:

EPS changes: +0%/+946%/+94% over CY26/27/28e reflecting: the $700m contract; higher working capital in 1H27, higher tax rate. We have also incorporated scripbased earnout payments in CY27, totalling 19m in shares. We have unwound our inflated EV / EBITDA multiple following the contract award.

And while the deal is subject to a number of conditions, Bell Potter feels confident it will go ahead. It explains:

We are not discouraged by the export licence terms and believe it is likely EOS will proceed to implementation of the contract in early CY27e. Beyond financial benefits, this contract: (1) likely gives further battlefield experience to the NIDAR C2 solution, strengthening its competitive advantage; (2) establishes EOS as a specialist C-UAS prime contractor; and (3) enables upselling of EOS effectors.

Big potential returns

According to the note, Bell Potter has retained its buy rating on the ASX stock with an improved price target of $13.80 (from $12.60). 

Based on its current share price of $10.13, this implies potential upside of 36% for investors over the next 12 months.

Bell Potter concludes:

Given the security deposit posted in August 2026, we believe this contract award was somewhat priced in by the market, however, we are surprised by the market’s reaction and given upcoming catalysts, believe current levels represent an attractive entry point. Catalysts: >$300m Netherlands HELW production deal (Letter of Intent signed in September 2026); UAE HELW JV orders, >$500m additional MARSS orders, and a steady stream of Slinger product integration orders.

The post Why this rapidly growing ASX drone stock could rise 36% appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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 Electro Optic Systems. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Life360 Inc. (ASX: 360) shares have been having a tough year.

Despite delivering strong growth across key metrics, the location technology company’s shares are down almost 40% since the start of the year.

While that is disappointing, Bell Potter thinks it could be a compelling buying opportunity for investors.

What is the broker saying?

Bell Potter highlights that EBITDA margin expectations are already low for the third quarter of FY 2026 due to increased marketing spend.

The good news is the broker believes Life360 will achieve what is expected and even sees scope for it to exceed expectations. It said:

Life360 has already set the bar relatively low for 3Q2026 by flagging an adjusted EBITDA margin of around 18% which compares to 20% in the pcp and also the previous quarter. The reason for the lower margin is flagged higher marketing spend during the quarter and also the lack of a tariff refund which was received in 2Q2026. 

The likely decrease in margin is, therefore, nothing untoward and looks to be reasonably well anticipated with a VA consensus forecast of c.19%. We ourselves forecast a margin of 18.3% in Q3 and expect our forecast to at least be met if not exceeded. We note that the company guided to a low double digit adjusted EBITDA margin in 1Q2026 – which was later clarified as being close to 10% – and then reported a margin of 12% so the company has some form in guiding to a certain level and then slightly exceeding it.

And while the broker doesn’t expect a guidance upgrade with the results, it believes there is potential for user growth to be on track to achieve guidance in FY 2026. It adds:

Given the anticipated slightly weak adjusted EBITDA margin in Q3 we do not expect any upgrade to the 2026 guidance when the quarterly is released on 10th November and this perhaps partly or largely explains the weakness in the share price since the release of the Q2 result in August. But in the absence of any upgrade there may still be some positives such as MAU growth >5m and/or paying circle growth around 200k in Q3 which would increase the likelihood that at least the low end of the 17-20% MAU growth guidance range can be achieved.

Time to buy Life360 shares?

According to the note, Bell Potter has retained its buy rating on Life360 shares with a trimmed price target of $32.00 (from $33.00).

Based on its current share price of $20.34, this implies potential upside of 57% for investors over the next 12 months.

Commenting on its recommendation, Bell Potter said:

We have reduced the multiple we apply in our EV/EBITDA valuation from 25x to 22.5x due to the continued weakness in software and app stocks both domestically and offshore. We have also increased the WACC we apply in the DCF from 9.5% to 9.7% due to an increase in the risk-free rate from 4.5% to 4.75%. 

The net result is a 6% decrease in our TP to $32.00 which is still a material premium to the share price so we maintain our BUY recommendation. The upcoming quarterly result next month may well prove to be some sort of catalyst, more so because expectations are already low rather than anticipating any sort of material beat or upgrade to guidance.

The post Down almost 40%, are Life360 shares a strong buy in October? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
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• Life360 vs Droneshield: Which ASX tech stock is a better buy?
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• 3 ASX 200 shares I’d buy and hold for the next decade

Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. The Motley Fool Australia has positions in and has recommended Life360. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.