Category: Stock Market

The Shaver Shop Group Ltd (ASX: SSG) is under the spotlight as it unveiled a big increase in earnings but warned of softer sales.

The desperate rolling COVID-19 lockdowns are both a friend and foe for the personal grooming retailer.

The group posted a 68.3% surge in FY21 net profit to $17.5 million as sales improved 9.6% over the previous year to $213.7 million.

Shaver Shop profit and margin expands

What may be particularly pleasing was a large expansion in profit margins. Gross profit margin expanded 240 basis points, or 2.4 percentage points to 44.3%.

In a period when so many ASX companies are complaining about cost pressures, Shaver Shop is flexing its muscles.

One big contributor to the improved margins is cost control. Management shaved 110 basis points off operating expenses to 25.8% of sales in the period.

Shaving costs helped with strong result

“Shaver Shop worked proactively and collaboratively with landlords during lockdown periods,” said the company.

“In doing so, Shaver Shop received $0.8m in rent abatements in FY2021 for stores that were significantly impacted by government-imposed trading restrictions due to COVID-19.”B

Perhaps the comments were meant to contrast with the more confrontational approach some retailers, such as Premier Investments Limited (ASX: PMV), have taken with landlords.

Shaver Shop profit results boost dividends over 70%

The retailer also credited its astute management of store rosters during the long COVID lockdowns. This resulted in employment cost savings during the year.

Shaver Shop is using some of the stronger profit and margins to reward shareholders. It declared a fully franked final dividend of 5 cents a share, which takes total dividends for the year to 8.2 cents. That’s a 71% increase over FY20’s total dividends.

Has Shaver Shop’s sales peaked?

But management’s outlook could be the chink in the armour as it suggests its revenues may have peaked.

Shaver Shop reported that total sales since the start of this financial year is 7.3% below that of the same period in FY21.

The retailer blamed the long painful lockdowns in Victoria and New South Wales for the drop. Interestingly, Shaver Shop was seen as a COVID winner during the earlier COVID outbreak as more stuck-at-home consumers had to turn to DIY grooming.

Foolish takeaway

The latest round of lockdowns is driving a big surge in Shaver Shop’s online sales, but that’s not enough to offset the losses.

Website sales has jumped 52% since the start of FY22 over the same time last year and is up 368.1% versus FY20.

Given that the Shaver Shop share price is “only” up 13% over the past year, maybe investors will be happy to overlook the negatives.

The post Shaver Shop (ASX:SSG) share price in focus as profit jumps but outlook softens appeared first on The Motley Fool Australia.

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Some ASX dividend shares offer yields that may be attractive enough to consider them as potential dividend candidates.

These companies are ones that have been rated as buys by analysts and just paid large dividends in FY21.

Here are two to think about:

Inghams Group Ltd (ASX: ING)

Inghams is a large poultry business. In FY21, its core poultry volume rose 4.2% to 446.9kt. Underlying net profit after tax (NPAT) pre-AASB 16 increased by 28.4% to $101.2 million.

The company decided to increase its annual fully franked dividend by 17.9% to 16.5 cents per share after the increase of profit. This represented a dividend payout ratio of 71%, which was within the company’s targeted dividend payout ratio of between 60% to 80% of underlying net profit.

Inghams also said that its balance sheet is in a strong position, with net debt declining during the period to $240.2 million. The company said this leaves Inghams “well positioned for future growth opportunities”. It was also able to reduce its inventory by $30 million as it reduced its excess frozen processed poultry stock that had built up as a result of the COVID-19 effects.

In terms of an outlook, the ASX dividend share said that volumes are expected to show continued growth with new business across various channels with a consumer recovery restart when vaccination rates increase and the current lockdowns are lifted.

It also said that feed costs have stabilised during the second half. However, volatility in international commodity markets has led to domestic pricing “holding firmer”. The business continues to hold forward purchase cover on key feed ingredients of between three to nine months.

The broker Citi currently rates the Inghams share price as a buy. It’s expecting the FY22 dividend to be 17.8 cents, an increase of around 8%. The projected forward grossed-up dividend yield is 6.2%.

Nick Scali Limited (ASX: NCK)

Nick Scali one of the largest furniture retailers in Australia and New Zealand. It had 61 showrooms at the last count and it continues to assess the new opportunities in line with its long-term showroom network target of 85 showrooms.

FY21 was a year of strong demand for Nick Scali products, which also allowed profit margins to rise substantially.

Sales revenue rose by 42.1% to $373 million and underlying net profit after tax doubled to $84.2 million. The underlying earnings before interest and tax (EBIT) margin improved by 940 basis points to 32.7%.

Looking at the dividend, Nick Scali’s board decided to increase the final dividend by 11.1% to 25 cents per share. That brought the full year dividend to 65 cents per share – a dividend payout ratio of 63%.

However, the ASX dividend share warned that lockdowns caused written sales orders to fall 27% in July 2021 (which is the start of FY22) compared to July 2020, but up 24% on July 2019. Online growth was 88% for July 2021 compared to July 2020.

Management said that the company’s future growth will be primarily driven by the continuing store rollout and increasing online penetration.

The broker Citi currently rates Nick Scali as a buy. It thinks the company will pay a FY22 dividend of $0.55 per share, equating to a projected grossed-up dividend yield of 6.5%.

The post 2 leading ASX dividend shares to consider for income 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 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 Bruce Jackson.

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The Mineral Resources Limited (ASX: MIN) share price has been rebounding in recent days. Shares in the Aussie lithium miner climbed 2.7% higher to $53.53 per share on Monday and are now up 4.9% in the last 6 trading days.

What’s been boosting the Mineral Resources share price?

There have been very few ASX announcements from the Aussie lithium miner since its full-year results release on 11 August. That hasn’t stopped the Mineral Resources share price from climbing higher in recent days.

One thing to always consider with commodity-based shares is how the underlying commodity price is tracking. In the case of Mineral Resources, that means looking at global lithium prices.

Lithium prices are currently sitting at 92,500 Chinese Yuan (CNY) per tonne, up some 98.9% since the start of 2021. That has helped boost ASX lithium shares like Mineral Resources higher throughout the year.

It’s been a similar story for rival miner Pilbara Minerals Ltd (ASX: PLS). Pilbara Minerals shares jumped 6.3% higher on Monday and are up 152.9% year to date while Galaxy Resources Ltd (ASX: GXY) shares are up 136.7% this year.

The Mineral Resources share price has seen strong, if more modest, gains. Shares in the lithium miner are up 39.2% this year and 83.5% in the last 12 months.

There have also been signs of positivity coming from abroad. Aussie lithium miners have reported strong realised average prices in recent results while global electric vehicle (EV) demand climbs.

Are there other factors at play?

Commodities shares globally have been on something of a rollercoaster in recent weeks. One key factor has been market speculation on the withdrawal of COVID-19 stimulus measures by the US Federal Reserve.

Volatility has been seen in commodities pricing as participants try to guess the next move by Jerome Powell and the Fed. That has had a knock-on effect for some ASX mining shares with the Mineral Resources share price still down 11.2% year to date.

Shares in the lithium miner have hit something of a purple patch in recent days and are riding on high commodities prices, greater investor optimism and recent FY21 results.

The post Why the Mineral Resources (ASX:MIN) share price is up 5% in 6 days appeared first on The Motley Fool Australia.

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Motley Fool contributor Ken Hall 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 Bruce Jackson.

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It has been an eventful month for the Zip Co Ltd (ASX: Z1P) share price.

At one stage, the buy now pay later (BNPL) provider’s shares were up as much as 20% month to date to $7.99.

However, ahead of the final day of the month, the Zip share price is up just 2.7% in August and in danger of slipping into the red.

What’s been going on in August for the Zip share price?

The Zip share price was rocketing higher earlier in the month after it was announced that rival Afterpay Ltd (ASX: APT) would be acquired by US payments giant Square.

Investors were buying Zip shares on the belief that it could be a takeover target as well.

Particularly given how there has been speculation recently that larger BNPL rival, Klarna, has been building up a strategic stake in the company. This has never been confirmed nor denied by Klarna.

What has been weighing on its shares?

Unfortunately, the Zip share price failed to hold onto these gains and has pulled back almost 15% over the last three weeks.

This appears to have been driven partly by the release of its full year results for FY 2021.

Zip reported a net loss after tax of $653 million for the year due largely to a number of one-off non-cash items. It also revealed a significant increase (6x) in its marketing spend in FY 2021 to drive growth. This appears to have spooked investors.

Is this a buying opportunity?

The team at Morgans appear to believe the weakness in the Zip share price could be a buying opportunity.

Following the release of its full year results last week, Morgans retained its add rating and lifted its price target to $8.87. Based on the current Zip share price of $6.82, this implies potential upside of 30% over the next 12 months.

Morgans commented: “We lower our Z1P FY22F EPS by ~12% on higher costs but lift our FY23F EPS >10% (off a low base) on the benefits of higher growth.”

“We continue to see longer term upside if Z1P can execute on its ambitions of becoming a global payments player and maintain our ADD recommendation,” it concluded.

The post Here’s why the Zip (ASX:Z1P) share price has been volatile in August 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. owns shares of and has recommended AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The AMP Ltd (ASX: AMP) share price has been quietly climbing higher in August. Shares in the Aussie wealth manager are up 2.8% in the past month, having hit as high as $1.16 on 13 August.

Those numbers may not seem like much to investors, but 2021 has been a tough year for AMP. The AMP share price has slumped 28.9% lower in 2021 and remains down 78.8% in the last 5 years.

Here’s why August has been a good month for AMP and its shareholders.

What’s been boosting the AMP share price in August?

Perhaps the most obvious place to start is AMP’s full-year earnings result. For those who missed it, AMP reported a 57% increase in net profit after tax to $181 million. Group assets under management climbed 8% to $121.0 billion in what was good news for investors.

Controllable costs (ex AMP Capital) fell 6% to $387 million as AMP reported surplus capital of $452 million – above target requirements.

The news helped boost the AMP share price even as the wealth manager declined to pay an interim dividend. New CEO Alexis George has her sights set on the AMP Capital Private Markets demerger in the first half of FY22.

Shares in the Aussie wealth manager have been up and down in August but have managed to make incremental gains in recent weeks. That has also been helped by a broadly positive ASX earnings season including solid results from other investment management firms.

Investors appear positive enough about AMP’s relative performance with the company holding onto recent gains as we near the end of the month.

Foolish takeaway

Prior to the company’s earnings, the AMP share price was languishing just shy of an all-time low. While recent gains have not been monumental, they have helped boost AMP’s market capitalisation to over $3.5 billion.

The post August has been a good month for the AMP (ASX:AMP) share price appeared first on The Motley Fool Australia.

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Motley Fool contributor Ken Hall 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 Bruce Jackson.

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There are some online ASX shares that are predicting big things and hope to achieve growth over the coming years.

Businesses that operate with online business models may be able to achieve relatively high operating profit margins and grow fairly quickly.

The way COVID-19 has impacted certain industries is very different to other sectors. But these two online ASX shares are expecting to generate a lot more profit in the coming years.

Adore Beauty Group Ltd (ASX: ABY)

Adore Beauty is a leading e-commerce business that sells almost 11,000 products from around 260 brands.

The company recently reported that its FY21 revenue was $179.3 million, an increase of 48% year on year. Active customers grew 39% to 818,000, with returning customer growth of 64%. Annual revenue per active customer increased 7% to $219.

Adore Beauty also revealed growing profit margins. The gross profit margin increased by 1.2 percentage points to 33.1%. Earnings before interest, tax, depreciation and amortisation (EBITDA) went up 53% to $7.6 million.

The online ASX share also said that FY22 has started strongly, with year to date revenue up another 26% over last year. Ongoing COVID-19 lockdowns are boosting new customer growth and returning customer spending.

Management of the company said:

Adore Beauty is executing a clear and robust growth strategy to cement its online market leadership position, and is well positioned to capture market share in a large and growing market benefiting from structural tailwinds.

The company expects to maintain an EBITDA margin of between 2% to 4% in the shorter-term whilst it re-invests to achieve growth. Over the longer-term it’s expecting to see scale benefits with increasing operating leverage, leading to the EBITDA margin growing.

Going into its report, Adore Beauty was rated as a buy by UBS, with a price target of $5.60.

Webjet Limited (ASX: WEB)

The ASX travel share is still feeling the effects of COVID-19 with travel and its total transaction volume (TTV) heavily reduced. Indeed, the nine months in Webjet’s FY21 saw TTV of $453 million, down from $3 billion in FY20.

However, the online ASX share points to several areas that it’s positive about for the future. Cost reduction initiatives are underway in all of its businesses, which are expected to deliver 20% lower costs across the company once the business returns to scale.

Management pointed to the Webjet online travel agency business where profitability continues to improve, demonstrating the scalability of the business model. Its market share continues to increase and the FY21 second half margin was above 30%.

WebBeds, Webjet’s business to business subsidiary, is committed to emerging as the number one global business to business provider. Webjet says it’s taking advantage of new revenue opportunities here as well as transformation initiatives that are on track to reduce costs by at least 20% when back at scale. It’s now targeting ‘8/3/5’. That means Webjet wants revenue to be 8% of TTV, costs to be 3% and the EBITDA margin to be 5% of TTV. That translates to an EBITDA margin on revenue of 62.5%.

The broker UBS rates Webjet as a buy, with a price target of $5.90.

The post 2 online ASX shares expecting big things appeared first on The Motley Fool Australia.

More reading

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• 2 quality ASX shares to look at this weekend

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 recommended Adore Beauty Group Limited. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Are you craving travel? Overseas? Interstate? Out of the city? Anywhere?

With more than half of Australia’s population in coronavirus lockdown, you’re likely not the only one missing a holiday to an exotic location.

So you’d reckon ASX travel shares would be a good bet, right? Surely when border closures lift, the pent-up demand will be a bonanza?

No, because Mr Market isn’t an idiot.

Mr Market is pretty smart most of the time

Forager Funds chief investment officer Steve Johnson likes to remind everyone of a character from Ben Graham’s classic book The Intelligent Investor.

Mr Market is an anthropomorphic metaphor for the share market.

“Some days Mr Market is depressed and wants to sell you his stocks at absurdly low prices,” Johnson wrote in Money Magazine.

“On other days he is wildly optimistic and wants to buy your shares for a fortune.”

But despite those occasional mood swings, he’s actually pretty smart most times.

“He might be capable of irrational behaviour. We have seen plenty of that over the past 18 months. But he’s not stupid,” said Johnson.

“In fact, most of the time, Mr Market is an incredibly prescient character.”

Mr Market already knows travel will recover

Why is Mr Market so smart? It’s because stock prices are formed as a result of “hundreds of thousands” of investors doing their own analysis with all the information available.

It’s the old efficient market hypothesis.

“There’s plenty of research, best summarised in James Surowiecki in his book The Wisdom of Crowds, showing that the crowd gets it right far more often than any individual expert,” Johnson said.

“As a general rule, you won’t make any money predicting things that Mr Market already knows. And a travel recovery is the perfect example.”

He took travel shares Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) as examples of this.

“Travel is going to recover, but the market prices of these companies already assume that this is the case,” said Johnson.

“The total market value of online travel agent Webjet, for example, is higher than it was prior to any mention of COVID-19. Flight Centre, too, is trading back near peak valuation levels.”

But here are 2 shares with structural advantages

However, Johnson reckons his funds have found 2 lesser-known travel shares that aren’t just relying on recovery in tourism to boost their fortunes.

“Successful investments… don’t just require an insight. They require an insight that is unique.”

They are adventure tourism provider Experience Co Ltd (ASX: EXP) and recreation vehicle rental company Apollo Tourism & Leisure Ltd (ASX: ATL).

Johnson’s team bought into Experience Co several years ago when it was experiencing financial difficulties.

“Previous management made a number of large investments in far north Queensland which predictably soured. The share price tumbled and we started buying some shares.”

But with new leadership at the helm, net debt has been slashed from $30 million to $2 million. This allowed the business to endure bushfires and COVID-19 without raising new cash.

“Experience Co is surviving off domestic tourism alone. And the share price, too, has recovered to the levels of early 2020,” said Johnson.

“But when international tourists return en masse, hopefully in 2023, it’s our belief that this lean, restructured business will be significantly more profitable than ever before.”

The thesis for Apollo is similar, he added.

“Mr Market is anticipating a recovery, but he’s underestimating the amount of structural change both companies have made to their businesses.”

With the market so inflated now compared to a year ago, it’s harder to find gems that Mr Market hasn’t woken up to.

“There are pockets of opportunities. Most of our Australian Fund portfolio consists of businesses that we think have made permanent structural improvements that have been masked by the impact of COVID. But most prices today reflect a fairly sensible view of the future,” Johnson said. 

“He will get depressed again, but for now Mr Market should be getting the respect that he deserves.”

The post 2 obscure ASX travel shares to soar after COVID-19 appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo owns shares of Webjet Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended EXPERNCECO FPO. The Motley Fool Australia owns shares of and has recommended EXPERNCECO FPO and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price has been a strong performer in 2021.

Since the start of the year, the banking giant’s shares have risen 21.5%.

This is almost double the return of the S&P/ASX 200 Index (ASX: XJO) over the same period.

Can the ANZ share price keep on rising?

According to one leading broker, the ANZ share price is still great value despite its strong rise in 2021.

A recent note out of Morgans reveals that its analysts have an add rating and $34.50 price target on the banking giant’s shares.

Based on the latest ANZ share price of $28.00, this will mean potential upside of 23% over the next 12 months before dividends.

And with Morgans forecasting dividends of $1.45 per share in FY 2021 and $1.65 per share in FY 2022, the potential return stretches to over 28% including them.

What did the broker say?

ANZ is Morgans’ top pick in the banking sector and believes it offers great value for money. It also believes the bank is well-placed to benefit from a number of industry tailwinds.

Earlier this month, Morgans commented: “We believe ANZ is the most compelling of the major banks on a valuation basis. We expect ANZ to benefit the most of the major banks from the tailwinds currently in place for treasury and markets income. We expect ANZ to continue to focus on absolute cost reduction over the medium term. ANZ has de-risked its loan book over recent years –particularly its institutional loan book –such that the quality of its loan book has increased.”

So while the ANZ share price has smashed the market in 2021, this broker doesn’t believe the gains are over just yet. This could make it a top option for investors that don’t have exposure to the sector.

The post Top broker says ANZ (ASX:ANZ) share price is a buy 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 Bruce Jackson.

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If you’re looking for some growth shares to add to your portfolio next month, then you might want to look at the ones below.

Here’s what you need to know about these highly rated ASX growth shares:

Life360 Inc (ASX: 360)

The first ASX growth share to look at is Life360. It is the growing technology company behind the Life360 mobile app. This is a market leading app for families offering useful features such as communications, driver safety, and location sharing. Life360 has also recently expanded into the wearables market via the acquisition of Jiobit. This increases its total addressable market and opens up cross selling opportunities. And there certainly are a lot of users to cross-sell to. At the end of the first half, the company’s Global Monthly Active User (MAU) base reached 32.3 million, up 28% year on year. This underpinned a 36% increase in Annualised Monthly Revenue (AMR) to US$105.9 million.

Credit Suisse currently has an outperform rating and $10.00 price target on Life360’s shares.

Pushpay Holdings Group Ltd (ASX: PPH)

Another ASX growth share to consider is Pushpay. It is a leading donor management and community engagement platform provider for the faith sector. Thanks to the digitisation of the church, the shift to a cashless society, and its industry leading technology, Pushpay has been growing strongly over the last few years. For example, in FY 2021 the company delivered a 40% increase in operating revenue to US$179.1 million and a 133% increase in EBITDAF to US$58.9 million. And while its growth will moderate in FY 2022, its long term outlook remains very positive. Particularly given recent acquisitions which are bolstering its offering and opening up new markets.

At present, Ord Minnett has a hold rating on Pushpay’s shares. But its $1.90 price target offers over 11% upside.

Temple & Webster Group Ltd (ASX: TPW)

A final ASX growth share to look at is this online furniture and homewares retailer. It has been growing at a very strong rate in recent years thanks to the shift to online shopping. For example, in FY 2021, the company posted an 85% increase in revenue to $326.3 million and a 141% jump in EBITDA to $20.5 million. It has also just released a trading update which reveals that FY 2022 has started strongly. Between 1 July and 27 August, Temple & Webster’s sales were up 49% over the prior corresponding period. Positively, with online furniture shopping still in its infancy compared to other retail categories, the company appears well-positioned for further strong growth over the next decade as online penetration rates increase.

Morgan Stanley is very positive on the company. It has an overweight rating and $16.00 price target on the company’s shares.

The post 3 excellent ASX growth shares for September appeared first on The Motley Fool Australia.

More reading

• ASX 200 rises, Altium sinks, Fortescue climbs
• Which ASX companies are starting off the week as the top movers in the ASX 300 today?
• Why Adore Beauty, Fortescue, InvoCare, & Temple & Webster are charging higher
• Temple and Webster (ASX:TPW) share price jumps 13% as revenue soars
• Why these ASX shares just hit 52-week highs or better

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. owns shares of and has recommended Life360, Inc., PUSHPAY FPO NZX, and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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A number of ASX shares could be ideas to consider with investing money.

Businesses that are good value may be long-term opportunities, particularly if analysts call them out as ideas.

Share prices are always changing, so different businesses can turn into opportunities, depending on the value.

These two ASX shares might be worthwhile considering:

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

This exchange-traded fund (ETF) is offered by VanEck, one of the larger ETF providers.

As VanEck says, the idea behind the ETF is that it gives investors exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar’s equity research team.

The only businesses that are even candidates to make it into the ETF’s holdings are ones that have wide economic moats that can be sustained for a long period of time.

From those potential candidates, Morningstar assesses what a fair value for each of them is. If the business is at a good value compared to that fair value assessment then it may make into the portfolio.

At 27 August 2021, there were 48 businesses in the portfolio. Some of the names in there included Salesforce.com, Facebook, Alphabet, Kellogg, McDonalds, Microsoft, Pfizer, Yum! Brands, Adobe, Amazon.com, Blackrock and Berkshire Hathaway.

Past performance is not an indicator of future performance. However, VanEck Morningstar Wide Moat ETF has outperformed the S&P 500 over the longer-term. Over the last five years the ETF has returned an average return per annum of 19.35%, compared to 17.46% for the S&P 500. That’s after the annual fee of 0.49%.

Reject Shop Ltd (ASX: TRS)

Reject Shop is an ASX share that operates a national chain of discount stores.

It’s currently rated as a buy by Morgan Stanley, with a price target of $10. That suggests the Reject Shop share price could increase by over 60% in the next year, if the broker is right.

The broker noted the FY21 result in its assessment of the company’s valuation.

Reject Shop slightly beat its sales guidance, with sales falling 5.1% to $778.7 million. COVID-19 and lockdowns caused various impacts on its store network around the country during FY21.

Stores in large shopping centres and CBD locations saw a significant reduction in footfall with comparable store transactions down 19% on FY19. But the remaining store portfolio saw sales growth of 0.1% compared to FY19.

Approximately half of its stores are metro and country stores in neighbourhood and strip locations, which count as those in the ‘remaining store portfolio’. That cohort of stores generated comparable store sales growth of 3.4% on FY19 and are, on average, the most profitable. These stores are the key focus of the company’s future growth strategy.

The ASX share continues to partner with Doordash for its online offering. It’s looking to grow online sales, but at this stage these sales are “not material”.

But, whilst sales fell, the business saw its profitability metrics rise. Underlying earnings before interest and tax (EBIT) rose 110% to $9.4 million and underlying net profit surged 134% to $6.4 million.

Management explained the company reduced its underlying costs by $22.5 million, which included $8.8 million of administrative costs and $13.7 million of store expenses. It managed to reduce labour costs to 13.9% of sales, down from 14.5% in FY20.

It’s going to invest some of these savings into technology and systems across the business, as well as prepare for growth. It continues to look for new stores in profitable locations. In the first two months of FY22, it opened a new store in Bendigo and closed an underperforming store, taking the national footprint to 361, up from 354 at June 2020. It wants to open another 20 stores in FY22, whilst closing five underperforming stores.

According to Morgan Stanley, the Reject Shop share price is currently valued at 14x FY23’s estimated earnings.

The post Have money to invest? 2 ASX shares that could be 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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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