Category: Stock Market

The ASX small-cap shares I’m going to share in this article have excellent potential to deliver long-term returns, in my opinion. I think they can outperform the S&P/ASX 200 Index (ASX: XJO) this year and beyond.

In most cases, it’s much easier to double a business in size from $250 million to $500 million than $25 billion to $50 billion. It becomes more difficult to grow a business the bigger it gets.

There has been a lot of volatility in the past 15 months surrounding retailers and how they’re going to perform in the coming period. All of the inflation and higher interest rates could impact things. But, there could also be longer-term opportunities.

Shaver Shop Group Ltd (ASX: SSG)

The small-cap ASX share describes itself as an Australian and New Zealand specialty retailer of male and female personal grooming products. It wants to be the market leader in ‘all things related to hair removal’.

It has over 120 stores across Australia and New Zealand selling a core product range comprising male and female hair removal products such as electric shavers, clippers and trimmers, and wet shave items. It also sells other items like oral care, hair care, massage, air treatment and beauty categories.

The company’s recent gross profit margin strength has enabled the gross profit to increase, despite the slight fall in total sales in the first month and a half in the second half of FY23.

Shaver Shop believes it operates in a “large and growing market driven by changing consumer preferences and new product innovation”. It thinks it can grow its market share, particularly in New Zealand, while generating good cash flow.

A key reason why I think it can outperform over the long term is because of how cheaply it’s priced. Using the Commsec FY24 projected numbers, the small-cap ASX share is priced at 8 times FY24’s estimated earnings with a grossed-up dividend yield of 14%.

City Chic Collective Ltd (ASX: CCX)

The City Chic share price has suffered around 80% over the past year. Many things have gone wrong for the business over the last couple of years.

Its FY23 half-year result was reportedly cycling a “strong prior corresponding period”, with sales down 8%. The company made an underlying earnings before interest, tax, depreciation and amortisation (EBITDA) operational loss of $3.4 million, while the statutory net loss was $27.2 million, with an additional inventory provision in the region of Europe, Middle East and Africa (EMEA).

But, I think the building blocks are there for a good earnings base in the future, with its presence in the US, UK and Europe.

The business says that it has strategic initiatives underway, targeting historical margins to deliver sustainable profit growth. That includes increasing the profit margin by lowering promotional activity in line with the “market improvement” and lower inbound logistics costs. It’s also expecting to have a positive net cash position by the end of the current financial year.

The small-cap ASX share is also aiming to scale its international businesses and leverage the customer base and operating structures to “drive profitable growth”.

Using the estimates on Commsec, the business is trading at 8 times FY25’s estimated earnings.

The post 2 small-cap shares I rate to beat the ASX 200 in 2023 (and beyond) appeared first on The Motley Fool Australia.

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• Investing for passive income? I’d pick up this little-known ASX dividend share
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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 no position in any of the stocks mentioned. 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.

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The ASX share Dusk Group Ltd (ASX: DSK) could pay an extremely high dividend yield in the coming years. In fact, it could be one of the highest yields that investors can find on the ASX by FY25.

Dusk is a retailer of home fragrance products designed by the company and exclusive to Dusk. Its products include candles, ultrasonic diffusers, reed diffusers, and essential oils, as well as fragrance-related homewares.

The business has seen plenty of volatility since the start of COVID-19. The Dusk share price has dropped by more than 20% since mid-January, meaning the dividend yield is now higher.

Despite the fall, it’s worth noting the business has a market capitalisation of $96 million according to the ASX, while having net cash of $32.9 million at the end of the FY23 half-year result. A third of the company’s market capitalisation is backed by cash.

Dividend expectations for the ASX share

Dusk’s earnings and dividend are expected to fall in FY23, according to Commsec. The business is currently valued at eight times FY23’s estimated earnings with a possible grossed-up dividend yield of 12.3%.

But the business could see rising earnings and dividends by FY25 as the company expands and benefits from the (hopeful) improvement in economic conditions.

Dusk’s earnings per share (EPS) could rise to 25 cents by FY25, which could allow it to pay an annual dividend per share of 18 cents. This would represent a grossed-up dividend yield of around 16%.

The dividend yield and income alone from Dusk could deliver strong returns for investors.

What will help Dusk deliver earnings growth through the coming period?

In the first seven weeks of the second half of FY23, the business reported total sales were down 3% year over year. However, it had a number of positive comments to make:

The gross margin rate remains slightly above pcp [prior corresponding period] and inventory is clean. The Company expects to open a further 6 stores in Australia in 2H FY23 and the NZ store trial will continue with important learnings being implemented.

Our strategic focus on strong execution and a nimble operational model is unchanged. We operate a multi-channel business model with a differentiated and exclusive range and a compelling relative price proposition. We offer customers an affordable gift or personal luxury. These factors have been at the heart of our historic success, and we expect they will remain essential to our performance. The development of innovative new products that represent great value for money to our growing customer base will continue as we navigate through a challenging macro-economic environment.

Foolish takeaway

Dusk is doing what it can to set up growth for the future, and forecasts suggest that Dusk’s dividend yield is going to be very large in the next few years. The business could also be attractive to investors because of its very low price/earnings (p/e) ratio.

The post This ASX share could pay a 16% dividend yield by 2025 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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dusk Group. 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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Another huge week awaits ASX shares.

These are the three biggest events to monitor, according to eToro market analyst Josh Gilbert:

1. Reserve Bank cash rate decision

Unsurprisingly, the 2:30pm Tuesday decision will have the biggest direct impact on sentiment for ASX shares.

Will the central bank raise interest rates again to fight inflation or hold it steady to help struggling Australians?

It’s a close call, with 55% of economists in a survey last week predicting a rise, while the other 45% tip a hold.

According to Gilbert, last week’s updated annual inflation of 7% didn’t really give a strong push for either side. 

“This reading offered no real surprises from what the RBA already knew after pausing in April, scaling back expectations for another rate hike this week,” he said.

“However, another increase can’t be ruled out, with inflation still way above the RBA’s target rate of 2% to 3%.”

The market is expecting a hold, so a hike on Tuesday afternoon could cause ripples.

“The central bank put rates on hold [in April] to give itself some time to breathe while assessing the state of the economy after its huge tightening cycle,” he said.

“Given that this data didn’t throw up any shocks, the market would be surprised by a hike this week.”

2. US Federal Reserve rate decision

There is also a rate decision pending in the US, which often has a big bearing on Australian shares.

Gilbert is forecasting America will see one last “insurance hike”. 

“US inflation is still the most important number in markets right now, driving the Fed and recession risks,” he said.

“Although headline inflation fell in March to 5%, the worry was that core inflation jumped to 5.6%, which is why the market is now expecting a 75% chance of another hike this week.”

In the US, unemployment is still low, consumer confidence actually increased last month, and the Nasdaq Composite (NASDAQ: .IXIC) is up more than 17% year to date.

But as a counter to that, the issues with the banking industry over there have tightened liquidity and slowed economic growth.

“Despite expectations for another rate hike, the market is still pricing in at least two rate cuts this year despite Jerome Powell saying there would be none,” said Gilbert.

“Rate cuts would spell good news for risk assets, particularly for tech and crypto, in the second half of the year.”

3. Apple results

The world’s biggest company by market capitalisation, Apple Inc (NASDAQ: AAPL), reports its latest numbers this week.

Last week’s positive reception to the performance of other tech giants has set the bar high.

“Apple investors’ expectations are high, with little to no room for error from the tech behemoth,” Gilbert said.

“The worry heading into the report is whether the global slowdown in computing device spending will dampen demand for its Mac computer, which accounts for 10% of Apple’s revenue.”

The big metric will be iPhone sales, which is Apple’s “primary revenue driver”. 

“Sales may be boosted by the re-opening of China, a large market for Apple as well as easing supply chain disruptions.”

With cost-cutting the theme of the moment throughout the tech industry, Apple will be expected to address its own plans.

“Given the current environment, I’d also expect to hear from Apple’s management on fine-tuning operating expenses for the full year to help margins, with its forecast for the next quarter likely to be scrutinised by the street.”

Gilbert reminded investors that already Apple’s revenue is expected to fall 4.8% and earnings by 6%.

“Apple investors aren’t accustomed to being disappointed on earnings, but they were let down last quarter, so a strong result and a beat will be needed in order to underpin Apple’s 30% [share price] gain in 2023.”

The post 3 things ASX investors should watch this week appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo 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 Apple. The Motley Fool Australia has recommended Apple. 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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Passive income is a fantastic way of earning extra cash on the side from the comfort of your own home.

Two ASX 200 iron ore shares to look at for passive income are Fortescue Metals Group Ltd (ASX: FMS) and BHP Group Ltd (ASX: BHP).

So how could I earn $400 in monthly income by investing in these two ASX 200 iron ore shares?

Could I generate $400 monthly income from Fortescue and BHP?

Starting from the beginning, a $400 monthly income equates to $4,800 of annual income.

Secondly, the calculations we are looking at here reflect the dividend payments made to shareholders over the past 12 months. Keep in mind, he dividend payments for ASX 200 iron ore shares could change in future years.

Fortescue paid a fully franked interim dividend of 75 cents per share in the first half of this year. This follows the company paying a final dividend of  $1.21 per share fully franked in the second half of last calendar year. In total, Fortescue has paid $1.96 in total dividends in the last year.

This equates to a trailing dividend yield of about 9.4% based on the company’s last closing share price of $20.94. Fortescue shares have lost nearly 4% in the last year as can be seen below.

Now, let’s take a look at BHP. The company paid an interim dividend of $1.36 in the first half of this year. This follows the company paying a $2.55 final dividend in the second half of last year. In total, this means BHP paid $3.91 in dividends to shareholders in the last year.

Based on BHP’s last closing price of $44.40, this equates to a trailing dividend yield of 8.8%.

How much would I need to invest to get $400 a month in dividends?

My average dividend yield, if I invested the same amount in both BHP and Fortescue, would be 9.1%.

Therefore, to generate $400 a month (or $4,800 in yearly passive income) with a 9.1% average dividend yield, I would need to invest $52,747 overall.

Alternatively, I could invest $4,396 per month for the next 12 months in these two ASX 200 iron ore shares to reach my goal.

The post How I’d generate $400 in monthly passive income from 2 ASX 200 iron ore shares appeared first on The Motley Fool Australia.

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• Why did the BHP share price dive 6% in April?
• Bull and bear factors impacting BHP shares
• Looking to buy ASX 200 iron ore shares? Here are 5 reasons not to
• Did Fortescue really just buy 60,000 sheep?
• Top brokers predict BHP shares to surge past $50 again in 2023

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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.

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The IGO Ltd (ASX: IGO) share price has been a positive performer over the last 12 months.

As you can see on the chart below, during this time, the ASX 200 lithium share has risen almost 11%.

This compares very favourably to the performance of the S&P/ASX 200 Index (ASX: XJO), which is down 0.5% over the same period.

Has this ASX 200 lithium share peaked?

The good news for investors is that the team at Goldman Sachs believes this ASX lithium share can still rise a bit further from here.

According to a note, the broker has responded to IGO’s quarterly update by retaining its buy rating with an improved price target of $14.30.

As with most mining updates during the last quarter, its analysts were not blown away with the company’s performance. They commented:

3Q23 spodumene production softened in line with GSe to 356kt down 6% QoQ driven by lower throughput attributed to a reduction in CGP1 and CGP2 run time during the quarter and mined grade fell slightly 2.59%, though remains above long run grade expectations of ~2% at Greenbushes. Sales revenue of A$2.8bn was up 23% QoQ representing higher spodumene contracted prices and favorable sales mix with high grade spodumene product. IGO expects higher spodumene sales volumes in the June quarter, following the 13% fall in shipments in the March quarter, where spodumene sales were 336kt for 3Q, 9% below GSe.

Despite this, the broker remains a fan of this ASX 200 lithium share and continues to recommend it as a buy. This is due to its attractive valuation compared to peers, its strong free cash flow generation, and the low costs of its key Greenbushes operation. It explains:

We rate IGO a Buy on: 1) Valuation: trading on ~1.0x NAV and pricing ~US$1,050/t spodumene (peer average ~1.3x NAV and ~US$1,300/t), and near-term FCF yields of c. 15-20% in FY23/24E and c. 10% in FY25/26E remain attractive vs. peers, 2) Greenbushes the lowest cost lithium asset in our coverage, 3) TLEA dividends de-risk nickel spend; Ni volumes declining, but study outcomes due this year.

The post Buy this ASX 200 lithium share in May: Goldman Sachs appeared first on The Motley Fool Australia.

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• Here’s the latest forecast for ASX 200 lithium stocks from UBS

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 no position in any of the stocks mentioned. 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.

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The BHP Group Ltd (ASX: BHP) share price sank 6% in April, marking a difficult month for the ASX mining share. It performed worse than the S&P/ASX 200 Index (ASX: XJO) which went up 1.8%.

Considering what a sizeable influence BHP has on the ASX 200’s overall return, it’s quite interesting there was such a divergence in performance between BHP shares and the ASX 200.

Still, it was a decent month for a number of the other large ASX blue-chip shares such as Westpac Banking Corp (ASX: WBC), CSL Limited (ASX: CSL), Telstra Group Ltd (ASX: TLS), and National Australia Bank Ltd (ASX: NAB).

So what went wrong?

Iron ore price sinks

The iron ore price had been trading at around US$120 per tonne in the first half of the month and had reached above US$130 per tonne in March.

But, towards the end of the month, the price sank and that seemingly caused the BHP share price decline. At the time of writing, the price of iron ore is sitting at around US$105 per tonne so, overall, there was a rapid US$15 per tonne drop.

The price of the commodity can play a big part in how much profit BHP can make. Mining 10 million tonnes of iron typically comes with the same costs month to month, so any extra revenue for that production is largely extra profit, aside from paying more to the government.

But it’s the opposite when the iron ore price goes down – a reduction of revenue almost entirely hurts profit. That’s essentially what’s happening now.

Iron has been BHP’s biggest profit generator by some margin in recent years. But the business is on the way to acquiring OZ Minerals Limited (ASX: OZL), which would hopefully grow its copper earnings and diversify it away from iron ore.

What happens next for the BHP share price?

Things may be very unpredictable for BHP from here. It’s difficult at the best of times to know what the iron ore price is going to do in the short term.

The Australian Financial Review recently reported on a Citi note that suggested that the iron ore price could keep dropping to US$100 and then US$90 per tonne where it sees “meaningful cost support”.

This probably won’t be good news for the BHP share price.

As reported by Reuters last week, the Chinese economy has not yet returned to strong economic growth after its COVID lockdowns. So, it may take stronger demand from the Asian powerhouse to lift BHP and investor sentiment.

BHP share price snapshot

Since the start of the year, BHP shares are down by around 2%.

The post Why did the BHP share price dive 6% in April? appeared first on The Motley Fool Australia.

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• Why did the NAB share price smash the ASX 200 in April?
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• Bull and bear factors impacting BHP shares
• These were the best-performing ASX 200 shares in April

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 CSL. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Westpac Banking Corporation. 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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ANZ Group Holdings Ltd (ASX: ANZ) shares will be on watch this week.

That’s because the banking giant is scheduled to release its eagerly anticipated half-year results on Friday 5 May.

Ahead of the result, let’s take a look to see what the market is expecting from the bank.

What to expect from ANZ’s half-year results

According to a note out of Goldman Sachs, its analysts expect ANZ to report cash earnings (before one-offs) of $3,978 million. This represents an impressive 27.8% increase over the prior corresponding period.

However, the market consensus is for slightly softer growth and cash earnings of $3,769 million for the six months.

As for dividends, Goldman is expecting this profit growth to underpin an 11.1% increase in ANZ’s interim dividend to 80 cents per share.

What else should you look out for?

There will be a lot of focus on margins during this banking earnings season. So, it certainly is worthwhile understanding what the market is expecting from ANZ’s net interest margin (NIM). After all, anything softer than expected (or better) could have a big impact on the performance of ANZ’s shares.

Goldman Sachs revealed that it is expecting the bank to report a NIM of 1.82%. It also believes that this will be the peak during the current cycle. It explained:

The key feature of ANZ’s FY22 result was its NIM outlook, in which it noted that i) its Sep-22 exit NIM was 1.80%, well ahead of the 2H22 NIM of 1.68% and ii) the environment will continue to be supportive for margins in 1H23. However, management also noted that only recently have rates become attractive enough for customers to start switching from at-call transaction accounts to term deposits (TDs).

In our recent analysis (here) we highlighted that current term deposit betas have averaged c. 0.75 this cycle, versus the 1.0 (currently assumed in our forecasts) seen in previous rate cycles. We will therefore be keen to get an update on how flows into TDs have tracked since then and commentary on where ANZ believes deposit mix could settle. We currently forecast the 1H23E NIM to increase by 13 bp hoh to 1.82%, and peak this half.

Are ANZ shares good value?

Goldman Sachs currently has a neutral rating and $26.48 price target on ANZ shares. This implies potential upside of 8.75% from current levels.

Analysts at Citi are more positive. They recently named ANZ as their top pick with a buy rating and $27.25 price target.

The post Looking to buy ANZ shares? Here’s what to watch in this week’s results 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 no position in any of the stocks mentioned. 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.

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The S&P/ASX 200 Index (ASX: XJO) finished the month in the green, but National Australia Bank Ltd (ASX: NAB) outperformed the index.

NAB shares have climbed more than 4.04% since market close on 31 March, closing on the last trading day in April at $28.84 apiece. For perspective, the S&P/ASX 200 (ASX: XJO) gained 1.83% over the same time frame.

So why did the NAB share price return more to investors than the ASX 200 in April?

What happened?

Looking at NAB’s performance against the other big four banks, it’s outperformed some but not all of them.

ANZ Group Holdings Ltd (ASX: ANZ) shares have risen more than 6% since 31 March while the Westpac Banking Corporation (ASX: WBC) share price gained nearly 4%. However, Commonwealth Bank of Australia (ASX: CBA) shares have only climbed 1%.

Big four bank NAB has not released any price-sensitive news to the market in the last month.

As well, ASX 200 bank shares appeared to have been resilient amid bank turmoil in the United States and Europe.

In April, Morgan Stanley analysts revealed Australian banks have “plenty of capital” amid global banking jitters.

Head of research at Morgan Stanley Richard Wiles said:

The major Australian banks learned the lessons of the 2008 global financial crisis and have significantly strengthened their liquidity, funding and capital.

Federal treasurer Jim Charmers also gave Australia’s banks a plug during April, saying, “Australian banks are well-capitalised, well-regulated and well-placed to deal with this new source of volatility in the global economy.”

National Australia Bank is set to deliver its half-year financial results to the market on Thursday this week.

Looking ahead, Goldman Sachs analysts are optimistic NAB can keep going higher. The broker has a “buy” rating on the company’s shares with a $35.42 price target.

This implies an upside of nearly 23% based on NAB’s last closing price of $28.84.

On the flip side, however, Morgans analysts have recently slashed the price target on NAB to $28.78. This is 0.2% lower than NAB’s latest closing price.

Commenting on NAB, the team at Morgans said:

Recent slowing of loan growth. Leading SME [small to medium enterprise] relationship banking franchise. Increased simplification and improving digitisation in personal banking.

Meaningful improvement in ROE that is in excess of cost of equity. Attractive yield and buyback. Cautious re step-up in costs and weaker valuation support.

On another note, the Reserve Bank of Australia is due to meet tomorrow to deliver its verdict on the official cash interest rate.

ASX 200 banks tend to raise their rates in response to any official rate hike from the central bank. However, City Index senior market analyst Matt Simpson believes the RBA is on track to keep the official cash rate on hold. 

Simpson said, “I suspect the RBA will be content in keeping rates on hold”, especially as “inflation expectations remain well anchored”. He added:

However, that is not to say the RBA have reached their terminal rate in the cycle, as disinflation needs to keep up the pact to justify a pause in the coming months.

Share price snapshot

The NAB share price has shed 11.6% over the last 12 months.

The bank has a market capitalisation of about $90.52 billion based on the last closing price.

The post Why did the NAB share price smash the ASX 200 in April? appeared first on The Motley Fool Australia.

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Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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.

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Megaport Ltd (ASX: MP1) shares had a stunning session on Friday.

The release of a surprisingly strong third-quarter update sent short sellers scrambling to the exits and the network services company’s shares hurtling 41% higher to $5.63.

Can Megaport shares keep climbing?

The good news for readers is that Megaport shares could have plenty of room to climb higher from current levels despite Friday’s heroics.

According to a note out of Goldman Sachs, its analysts have responded to the update by reiterating their buy rating with a slightly trimmed price target of $8.10.

This price target suggests that Megaport’s shares could rise by a further 44% over the next 12 months. Not bad considering the gains it made last week!

Why is Goldman bullish?

The note reveals that Goldman was impressed with Megaport’s performance during the quarter. Particularly given its poor performance in the second quarter and the sudden departures of its CEO and CFO. The broker believes this bodes well for the future and suspects that the company will have sufficient capital to reach its free cash flow goals. It commented:

Following significant share price weakness around 2Q23 earnings and CEO/CFO departures, the positive 3Q23 result (financial + operating metrics) and introduction of stronger than expected FY23/24 EBITDA guidance improves our confidence in the outlook both in the short term (pricing impact & cost out execution) and medium term (MVE/MCR returning to strong growth), while reinforcing our view that MP1 will not need to raise capital to reach a sustainable FCF position.

Looking ahead, Goldman is looking for the company to build on this performance in the coming quarters. If it does, it expects it to help improve investor confidence. It adds:

Looking forward, MP1 now needs to deliver a number of consistent quarters of improved momentum, and show that its direct sales investment can accelerate growth from 2Q24 to continue rebuilding investor confidence. We remain positive that this can occur, given we believe in the structural growth drivers underpinning in MP1’s growth outlook (cloud/multi-cloud/NaaS adoption) so retain our Buy rating, while raising FY24/25 EBITDA +7% to +4% given marginally lower revenues, offset by the greater cost out targets. Our 12m TP declines -1% to A$8.10, implying +44% upside.

The post Megaport shares can rise another 40%: Goldman Sachs 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 Megaport. The Motley Fool Australia has recommended Megaport. 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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I’m about to tell you about some excellent All Ordinaries (ASX: XAO), or All Ords, ASX shares that I think are very cheap.

Certainly, there’s been plenty of volatility in recent times, but this gives us an opportunity to buy shares at a (hopefully temporarily) cheaper price.

Lots of investors, analysts, and fund managers follow the largest businesses on the ASX. But I think it’s more likely to find an opportunity at the relatively unknown end of the market that could be priced at a better level.

With that in mind, these are two ASX All Ords shares that look particularly good to me.

Aeris Resources Ltd (ASX: AIS)

This is a very promising copper miner, in my opinion. The business is already producing copper and has more projects on the way. These could unlock a lot of extra earnings and cash flow in the future.

It has a market capitalisation of around $360 million, according to the ASX. At the end of the third quarter of FY23, it had $56 million of cash and receivables, around $25 million of stockpiled ore, and no debt. The balance sheet is in good shape.

In FY23, the ASX All Ords share is expecting to generate between $50 million to $70 million of earnings before interest, tax, depreciation and amortisation (EBITDA).

Aside from my belief that the copper price can improve over the long term because of higher demand due to decarbonisation, it’s the low valuation that makes me believe this is extremely cheap.

Commsec numbers suggest that the business could generate 17 cents of earnings per share (EPS) in FY25, which would put it at less than three times FY25’s estimated earnings. Even if it only generated 12 cents of EPS in FY25, that would put the price/earnings (p/e) ratio at less than four.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara says that it makes software to help save families from cancer. The company’s software helps healthcare providers better understand a patient’s cancer risk and empowers patients in personal care decisions. It also guides recommendations about additional imaging, genetic testing, and other interventions.

Its software is used in more than 2,000 facilities, by more than 5,000 technologists, helping conduct more than three million cancer risk assessments each year.

The All Ords ASX share is delivering a lot of impressive numbers. In its fourth quarter of FY23, which it just announced, it achieved record cash receipts from customers of more than NZ$10 million. This was up 19% in constant foreign exchange rate terms year over year. Certainly, that growth rate is enabling the business to compound at a good rate.

Its quarterly update also showed the second straight positive net operating cash flow quarter. It’s not making a lot of cash flow yet, but being cash flow positive for a fast-growing business is a handy step.

If Volpara can sell more of its software to existing clients, win over new clients, and keep growing its scale, I think its gross margin profit of over 90% will enable the business to become very profitable in the future.

The post Why I think these ASX All Ords shares are extremely cheap right now 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 Volpara Health Technologies. The Motley Fool Australia has positions in and has recommended Volpara Health Technologies. 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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