It’s all well and good to decide to buy ASX shares. But so often, investors think they know a company and its associated risks well, only to be caught short later on. Of course, we can’t account for all possible outcomes – you can’t blame anyone investing in Qantas Airways Limited (ASX: QAN) in January 2020 for not seeing the full impacts of the coronavirus pandemic, for instance. But we can take steps to mitigate the possible risks of investing in a business by putting the company under the microscope.

So here are 3 ‘checks’ I like to go through in a business before I decide if an investment is worthwhile and risk-averse enough.

1) Debt

One thing you can’t take with a pinch of salt when investing is a company’s debt levels. Debt is a major catalyst for companies going into bankruptcy, so it pays to consider how much debt a company has before buying its ASX share. Now, some businesses need debt in order to function in its chosen market. It would be almost impossible for a mining company or a real estate investment trust (REIT) to operate without debt, for instance.

But if a company has a mountain of debt that it doesn’t really need, it’s a massive red flag in my books. So when you’re assessing your next potential investment, have a look to see how much debt its carrying and think about how it might manage to service this debt if there was a major economic crisis. A good place to start is the debt-to-equity ratio (D/E) where more debt than equity is a bad thing.

2) How does it sit with its competitors

Ideally, I like to buy shares of a business that dominates its field. The market leader will usually have several advantages going for it, such as brand loyalty and pricing power that stems from this loyalty. In contrast, a lesser competitor will often be throwing money at discounting its products to try and compete, which ends up weakening the business’s long-term strength. I usually try and buy the ASX share with the biggest advantage in an industry. There’s nothing wrong with backing a winner in investing.

3) Are its shares cheap?

This one seems obvious, but too often investors will want to own a company so much that they will pay a price that doesn’t make sense from an investing perspective. Warren Buffett’s right-hand man Charlie Munger once said, “no company, no matter how wonderful, is worth an infinite price”. Wise words from a wise man.

Buying ASX shares in a great company doesn’t equate to a good investment on its own. You also have to make sure there’s a reasonable chance your investment will give you a decent return over the long run, and buying something that’s overvalued greatly reduced the chances of this. So always be careful about how much growth you’re paying for in a share price. If you’re paying a price that is assuming 20 years of high-octane growth, the chances of something going wrong are high.

More reading

• Why MOAT is my favourite ASX ETF
• ASX 200 falls 2%, ASX travel shares drop heavily
• Top brokers name 3 ASX 200 shares to buy next week
• Is the Qantas share price a buy today?
• The smartest ASX shares to invest $10,000 in right now

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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In early afternoon trade the S&P/ASX 200 Index (ASX: XJO) is on course to record a very strong gain. At the time of writing the benchmark index is up 3.3% to 5,908.2 points.

Four shares that are climbing more than most today are listed below. Here’s why they are charging higher:

The Afterpay Ltd (ASX: APT) share price is up almost 9% to $55.88. This is despite there being no news out of the payments company today. At one stage the Afterpay share price hit a new record high of $55.93. And as I mentioned here earlier, one leading broker still believes its shares can go higher from here.

The Super Retail Group Ltd (ASX: SUL) share price has returned from its trading halt and jumped 8.5% higher to $8.48. This morning Super Retail raised $158 million through an institutional entitlement offer at an 8% discount of $7.19 per share. Management believes this equity raising will allow the company to continue to execute its strategy and pursue strategic growth initiatives. Super Retail also released a trading update which revealed that like for like sales rebounded strongly in May.

The Uniti Group Ltd (ASX: UWL) share price is back from its trading halt and up 7.5% to $1.66. This morning the growing telecommunications completed an institutional entitlement offer and raised approximately $152 million at $1.40 per share. These funds will be used to part-fund the acquisition of its larger rival Opticomm Ltd (ASX: OPC).

The Viva Energy Group Ltd (ASX: VEA) share price has jumped 15% higher to $1.75. This morning the fuel retailer released a trading update which included its guidance for the first half. Viva Energy expects its underlying net profit after tax (on a replacement cost basis) to be in the broad range of $20 million to $50 million. This appears to have been better than the market was expecting given the tough trading conditions it is facing.

More reading

• ASX 200 jumps 3%: CBA rebounds, Afterpay hits a new record high
• Afterpay and Zip shares are rocketing higher today: Can they go even higher?
• Is the Altium share price the steal of the century?
• ASX 200 falls 2%, ASX travel shares drop heavily
• The Afterpay share price is up 580% from its March low

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.

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At lunch on Tuesday the S&P/ASX 200 Index (ASX: XJO) has returned to form and is racing notably higher. The benchmark index is up 3.05% to 5,893.9 points at the time of writing.

Here’s what is happening on the market today:

Bank shares rebound.

The big four banks have been playing a key role in driving the ASX 200 higher on Tuesday. All four banks look set to end their losing streaks and are pushing materially higher at lunch. The best performer in the group is the Commonwealth Bank of Australia (ASX: CBA) share price with a gain of over 3.3%.

Super Retail returns.

The Super Retail Group Ltd (ASX: SUL) share price is back from its trading halt and is racing higher. This morning the retailer revealed that it has raised $158 million through an institutional entitlement offer at an 8% discount of $7.19 per share. These funds will be used to execute its strategy and pursue strategic growth initiatives. Super Retail also released a trading update which revealed that like for like sales rebounded strongly in May.

Afterpay hits a record high.

The unstoppable Afterpay Ltd (ASX: APT) share price is continuing its remarkable run on Tuesday. At one stage today the payments company’s shares hit a record high of $55.79. Fellow buy now pay later provider, Zip Co Ltd (ASX: Z1P), which just missed out on ASX 200 inclusion this quarter, is also up significantly today. Investors appear increasingly bullish on the sector and have been piling in today.

Best and worst ASX 200 shares.

Surprisingly, the Afterpay share price isn’t the best performer on the ASX 200 today. That honour goes to the Viva Energy Group Ltd (ASX: VEA) share price with its 14% gain. This follows the release of a trading update by the fuel retailer this morning. The worst performer on the index (and the only ASX 200 share in the red today) is the Mineral Resources Limited (ASX: MIN) share price with a 1% decline. This is despite there being no news out of the miner and mining services company.

More reading

• Why Afterpay, Super Retail, Uniti, & Viva Energy are charging higher
• Afterpay and Zip shares are rocketing higher today: Can they go even higher?
• Investing $1,000 into these ASX 200 shares could be a smart move
• Coles shares and 2 other ASX 200 companies to buy in the current market
• The Santos share price is down 36%! This is what I’d do today

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.

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The upcoming reporting season will be unlike any other in the history of the ASX. During the 8-week biannual ‘look-see’ that begins in July, the full extent of the coronavirus-led down-turn will be revealed. 

It’s important to not only pay attention to the financial results, but also look beyond the aberration within these distorted numbers to the underlying commentary supporting it. While a handful of shares within certain sectors like healthcare, technology and some retail will present pretty healthy numbers, the bulk of ASX-listed businesses are destined to report a deep sea of red.

The numbers – and outlook – that surface at reporting season can have a significant impact on the long-term value of the shares you own. While you need to know what to look out for at the best of times, in this post-COVID-19 world the stakes for correctly interpreting the tea leaves behind the numbers are higher than ever.

Don’t take headline numbers at face value

It’s important to understand that Australian accounting standards – which differ somewhat from generally accepted accounting principles (GAAP) – afford ASX-listed companies significant wriggle-room with which to weave their magic within their figures.  

Be very aware that the headline figures a company releases when in reports are the numbers that paint the best possible picture of the company’s performance. These numbers are also often the ones that most mainstream media will regurgitate.

While some companies treat stakeholders with a high level of transparency, others will try to bury some of the more meaningful numbers that perhaps don’t paint such a rosy picture. That’s not to suggest they’re doing anything illegal, it’s just that there are no real laws or requirements about how a company must structure their announcements, meaning those more important figures can sometimes find themselves pushed further out of sight.

For example, while earnings before interest and tax (EBIT) is often quoted, many businesses will present their ‘underlying EBIT’, which often strip out charges deemed ‘non-operating’. It’s also not uncommon for companies to move line items within their cash flow statement. Again, this is something that is completely within the accounting rules – nothing illegal. Companies can, for example, shift interest expenses from ‘cash flow from operations’ (CFO) to ‘financing cash flow’. The net effect is that this transition could make CFO look decidedly better by comparison.

Another trick that companies use to make a balance sheet look more respectable is off-balance-sheet leverage of minority shareholdings in associate companies. So for example, by only owning 49.9% of a business (and not having ‘control’ of that business), which may carry a lot of debt, companies aren’t obliged to include it on their balance sheet. This means a lot of leverage can be disguised within its consolidated reporting.

Tell-tale signs something’s out of whack

If there’s a sizeable difference between operating earnings (e.g. EBIT) and net profit after tax (NPAT), it may be necessary to find out what it is and why. 

In light of the coronavirus-led downturn, which for some companies became a liquidity crisis, this may be a much more acute issue within the upcoming reporting season. With many companies struggling to find the liquidity needed to meet day-to-day requirements, it’s important not to overlook their outstanding short- and long-term debt.

When it comes to debt covenants, try to gain a better understanding of the company’s requirements (e.g. how much cash it must hold, or the earnings it must generate to ensure it does not breach those covenants) and when its debts will come due. The company’s upcoming reports may shed some light on these factors and allow you to gain a better appreciation for how your shares might fare. For example, how will the business cope when any temporary covenant relief offered by the banks is lifted, or if liquidity doesn’t return in the near future. Will it be able to repay its debts, or is there a growing risk that it will not? 

Remember, if a company appears to be paying out more than it’s earning, it may be living on borrowed time. If the sky does fall in on these shares, remember a debt-holder and even hybrids have priority over you as a shareholder when it comes to claiming assets. 

I find that one of the best ways to get a quick fix on the quality of a company’s balance sheet – and other financial statements – is to check out key performance measures. These include debt levels, cash flow ratio, net-debt to equity, earnings per share, return on equity growth, and the strength of its cash flow relative to reported profits.

Tips to help separate the numbers from the spruiking

Here are 10 ways to ensure you really get to the bottom of a company’s results.

1. Have an idea of what you’re expecting from a company before it reports. That way you’ll be in a much better position to determine the strength of the results. 
2. Read the financial statement before the supporting commentary. If there’s no mention within the commentary of certain key numbers, that may be worth looking into further. 
3. Compare how a company presented its report in years past. If it has excluded numbers that it previously reported, that may be a yellow flag. 
4. Examine how well cash has been flowing through the business, and check to see whether profits and cash flow broadly align. 
5. Check to see if a company has a ‘funding gap’, due to insufficient cash, which is forcing it to take on debt or raise capital.
6. Check whether the type of business and its level of expenditure complement the way it chooses to report. Given that profit is an accounting number, you need to understand what’s excluded from underlying earnings. For example, a P/E valuation is more meaningfully applied to companies with an established history of consistent earnings than one that chooses to exclude many ‘one-off’ costs from its profit and loss statement.
7. Find out what management is doing for the long term good of the business. In other words, what are its plans for taking the business forward?
8. Does the company have a history of poor disclosure and why? Be on the lookout for companies that perennially need to satisfy a ‘please-explain’ to shareholders. 
9. Look for clues as to how management is responding to its problems. 
10. Check for guidance on dividend policy and pay-out ratios. Take a close look at the balance sheet and the quality of a company’s cash flow to decipher whether a dividend looks sustainable. 

While we believe there are still good buying opportunities in this environment, it is vital to separate the weeds from the flowers. Identify businesses that are capable of flexing their muscles, rather than those simply telling shareholders they have muscles without any evidence to back it up.

More reading

• 3 essential checks to do before buying ASX shares
• Why Afterpay, Super Retail, Uniti, & Viva Energy are charging higher
• ASX 200 jumps 3%: CBA rebounds, Afterpay hits a new record high
• Why AusCann, Phoslock, Kogan, & Village Roadshow are dropping lower
• ASX cannabis shares see mixed recovery

Motley Fool contributor Mark Story has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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The S&P/ASX 200 Index (ASX: XJO) has rebounded strongly from yesterday’s selloff. In late morning trade the benchmark index is up 3.05% to 5,893.4 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

The Auscann Group Holdings Ltd (ASX: AC8) share price is down over 3% to 15.5 cents. Investors appear to have been selling the cannabis company’s shares after it was kicked out of the All Ordinaries index. AusCann’s shares will be removed from the index at the next rebalance on 22 June 2020. The AusCann share price is now down almost 50% since the start of the year.

The Phoslock Environmental Technologies Ltd (ASX: PET) share price has crashed 13% lower to 39.7 cents. Investors have been selling the water treatment company’s shares after it downgraded its revenue guidance for FY 2020. It now expects revenue in the range of $30 million to $40 million. It was previously targeting revenue of $50 million to $70 million this year. Management has concerns that a second wave of COVID-19 could delay projects.

The Kogan.com Ltd (ASX: KGN) share price is down 0.5% to $12.92. Investors may believe the ecommerce company’s shares have now peaked after some stellar gains over the last few months. One broker that appears to believe this is the case is Credit Suisse. Late last week it put a neutral rating and $11.72 price target on Kogan’s shares.

The Village Roadshow Ltd (ASX: VRL) share price is down almost 2% to $2.13. This follows the release of a takeover update by the entertainment company this morning. According to the release, the company has extended the exclusivity period for its discussions with BGH Capital for a further two weeks. Investors may be concerned that these delays are a sign that discussions are not running smoothly between the two parties.

More reading

• ASX cannabis shares see mixed recovery
• How to earn $50,000 in dividends each year with ASX shares
• Leading fund manager names 4 ASX stocks set to benefit from a faster re-opening of the Australian economy
• S&P quarterly rebalance: A2 Milk added to ASX 50 & NEXTDC in the ASX 100
• How the A2 Milk and Bubs share prices have performed during the pandemic

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. 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.

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ASX cannabis shares have staged a mixed recovery since March. The Althea Group Holdings Ltd (ASX: AGH) and Cann Group Ltd (ASX: CAN) shares have had strong comebacks but the Auscann Group Holdings Ltd (ASX: AC8) price has been softer.

Coronavirus has no doubt had an impact on the cannabis industry with patients likely to be reliant on medicinal cannabis in times of stress, and crisis. 

Data from the Therapeutic Goods Administration (TGA) show prescriptions of medicinal cannabis remained steady during the coronavirus. The TGA approved more than 7,300 Special Access Scheme applications in March and April, up from 6,700 in January and February. With this in mind, we take a look at how ASX cannabis shares are performing. 

Althea Group cannabis shares

The Althea share price has recovered nicely from its March low, currently trading at 36 cents. The cannabis share is well up from its 16 cent low although below the January peak of 50 cents. 

Althea announced a 3-year supply agreement with Nimbus Health GmbH, a pharmaceutical wholesaler with a 25% cannabis market share in Germany, which boosted its May share price.  

Nimbus will sell and distribute Althea’s full suite of products in Germany under the Althea name. Althea will receive 50% of the net sale profits. In Germany, 120,000 patients have been prescribed medicinal cannabis to date with this number expected to grow to 1 million by 2024. 

In Australia, Althea finished the most recent quarter with 5,803 patients (increasing from less than 500 a year prior) and 509 healthcare professionals prescribing its products. This led to an increase in revenue. 

Revenue for the quarter containing March was up 39% from December. March’s revenue alone was the best month on record, increasing by 30% since February. This was achieved despite multiple challenges during the quarter including the Christmas holidays, bushfires, and the onset of COVID-19. 

Althea CEO Josh Fegan said:

“Against all odds the March quarter was a great success for Althea. Revenue certainly exceeded our expectations, whilst strong patient and prescriber growth continued. Gross profit margins have improved due to restructuring of commercial arrangements, with cash collection also now faster.”

Althea recently completed work on its Canada extraction and manufacturing facility; Peak Processing Solutions. Peak aims to leverage Canada’s legalisation 2.0 to allow the sale of cannabis-infused food, nutraceuticals, and cosmetics. Althea believes Peak is well-positioned to become a leading manufacturer for consumer brands looking to supply recreational cannabis and infused products. 

Auscann Group 

The Auscann share price remains near record lows for the year. It is currently trading at 16 cents up marginally from its 14 cent low in March and well below its January peak of 36 cents. Auscann was removed from the All Ordinaries Index (ASX: XAO) last week as part of the rebalance of S&P/ASX Indices.

Auscann released its prescription hard shell capsules in Australia earlier this year. The capsules are available to patients through the Therapeutic Goods Administrations’s special access scheme and authorised prescriber scheme. 

The company recently began its first clinical pharmacokinetics evaluation for 2 formulations of an orally administered THC/CBD combination. Dosing of the first volunteers has been completed. 

The study will assist medical professionals in prescribing its hard shell capsules and inform the dose selection. Auscann CEO Ido Kenyon said, “we are very excited to be progressing this important study to provide evidence-based information to medical professionals about our unique hard sheep capsule.”

Auscann finished the last quarter in a strong capital position with $24.7 million in cash and no debt. The March quarter recorded gross cash outflows of $2.7 million with net cash outflows for the quarter at $1.4 million due to the receipt of an R&D tax incentive refund of $1.2 million and $92,000 interest received. 

Construction of the Perth-based product development site was completed late last year with $4.5 million spent on the facility and additional capital spent on R&D equipment. The facility provides Auscann with a state-of-the-art centre to develop cannabinoid-based medicines. 

Cann Group 

Cann Group cannabis shares have staged a comeback from the March meltdown, up 50% from its low. Nonetheless, at 92 cents it remains well down from its January high of $1.69. Cann Group was also removed from the All Ordinaries Index last week.

Through new supply agreements executed with UK and European partners, the Cann share price did receive a boost last month. With import restrictions easing, European medical cannabis markets are expanding and wholesalers are building future inventory. 

New Zealand also holds a Cann supply agreement after medicinal cannabis regulations came into effect on 1 April. Cann Group CEO Peter Crock said, “these agreements represent important progress as we execute on our strategy to be a producer of choice for both the Australian domestic market and markets elsewhere.”

More reading

• Why AusCann, Phoslock, Kogan, & Village Roadshow are dropping lower
• Why Cann, IAG, Monadelphous, & Webjet shares are storming higher

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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The Race Oncology Ltd (ASX: RAC) share price has shot out of the gates this morning on the back of positive clinical trial results.

Race Oncology shares opened 74.6% higher today and raced to an intra-day high of 60 cents in early trade – a 90.48% surge. Shares have slightly pulled back since and are sitting 65.08% higher at the time of writing at 52 cents.

Race Oncology is a pharmaceutical company with a focus on later-stage drug assets in the cancer field. Its flagship product is a cancer drug called Bisantrene. The company is currently pursuing a ‘5-Path’ clinical development strategy that involves parallel US and Australian clinical trials for Bisantrene in acute myeloid leukaemia (AML), breast cancer and ovarian cancer.

Why is the Race Oncology share price skyrocketing?

This morning, Race Oncology reported clinical data from the Phase II clinical trial of Bisantree conducted at Israel’s Sheba Medical Centre.

The open label, single agent trial studied 10 patients with relapsed or refractory AML who, on average, had failed three prior lines of treatment. Race Oncology stated that Bisantree was found to be “well tolerated” and after a single course of treatment, had an overall clinical response rate of 40%.

According to Race, relapsed or refractory AML remains a significant therapeutic challenge. While meaningful therapeutic gains have been achieved in recent years with the introduction of new targeted drugs, the company believes clinical outcomes are still unsatisfactory.

Commenting on the trial results, Professor Borje Andersson, chair of Race’s advisory board, said:

“Importantly, in this study we saw a meaningful reduction in leukaemic disease burden and an overall response rate in 40% of the patients. While we must study the drug further, it appears that with this kind of response, bisantrene based therapy may have potential to serve as an important bridge to an allogeneic stem cell transplantation in patients who otherwise have few therapeutic options.”

What next?

Executive chair Dr John Cullity also shared his thoughts, commenting: “This drug is talking to us. As this was an open label, single agent trial, we can be confident that it was the bisantrene exposure which generated the positive results.”

“The patient cohort had advanced AML and had previously failed an average of three lines of therapy, so they were always going to be tough to treat. A 40% overall response rate after only a single course of treatment markedly exceeds expectations. It’s a hugely promising result and one which reinforces our development plans for bisantrene.”

In line with Race’s ‘5-Path’ clinical development strategy, a follow-up study combining Bisantrene with other anti-leukemic drugs is currently in advanced planning.

The company will also hold an investor briefing to discuss the significance of the trial results in more detail on Wednesday, 17 June.

With a current share price of 52 cents, Race Oncology’s market capitalisation is sitting at around $60 million. So if you’re looking to invest in larger and more liquid companies, check out the top ASX growth shares in the report below.

More reading

• Why AusCann, Phoslock, Kogan, & Village Roadshow are dropping lower
• ASX cannabis shares see mixed recovery
• 2 quality ASX 200 shares to buy for long-term growth
• Afterpay and Zip shares are rocketing higher today: Can they go even higher?
• Investing $1,000 into these ASX 200 shares could be a smart move

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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Looking for quality ASX 200 shares to buy right now?

Here are two of my top picks: Ansell Limited (ASX: ANN) and Sydney Airport Holdings Pty Ltd (ASX: SYD).

Although from very different industries, both companies are dominant in their operating markets. I also believe they both have strong, long-term growth prospects. As such, I feel they are well positioned for above average share price growth over the next five years.

Ansell

Ansell has proven to be one of Australia’s most successful companies for over a century. The company manufactures gloves and personal protective equipment for industrial and medical markets and its operations are underpinned by a strong research and development program.

Ansell has been experiencing very strong demand for some of its products during the coronavirus crisis. As revealed in a recent business update, sales of the company’s hand and body protection products have been extremely strong throughout the pandemic. These ranges of products are industry certified for protection against infections and viruses such as COVID-19. This robust demand during the pandemic has helped push the Ansell share price higher over the past few months.

Ansell has broad geographic diversity with sales operations across more than 50 countries. The company also has a number of new product lines that position it well for continued growth over the next few years. An increasing proportion of sales are being generated in emerging markets which, I believe, also strengthens Ansell’s growth prospects.

Ansell pays a forward annual dividend yield of 2.05%. In its latest business update, Ansell reiterated its FY 2020 earning per share guidance in the range of US112 cents to US122 cents.

Sydney Airport

The Sydney Airport share price has fallen by over 30% since mid-January. This is not surprising due to the sharp fall in traffic numbers resulting from government enforced travel restrictions. In its April traffic performance update, Sydney Airport revealed that total passenger traffic in April was down by 97.5%, compared to April 2019.

Notwithstanding this, I believe the company’s share selloff has been a bit overdone. As such, I feel this ASX 200 share could provide patient investors who have long-term investment horizons with a good buying opportunity.

In addition, the overall impact of coronavirus in Australia looks set to be less severe than first anticipated. Therefore, it appears likely the length of the lockdown period will be shorter than initially expected. This will hopefully see domestic passenger numbers start to pick up significantly in the months ahead. While it will take longer for international passenger numbers to pick up, they will eventually recover.

I believe Sydney Airport remains well positioned for strong growth over the next decade. It has a monopoly status in its market. Furthermore, once the COVID-19 crisis is over, I’m confident the long-term trend of rising passenger numbers driven by a rising population and growing tourism will continue.

More reading

• Why I would buy Wesfarmers and these ASX dividend shares
• ASX 200 falls 2%, ASX travel shares drop heavily
• ASX 200 Weekly Wrap: ASX bears take control as market volatility returns
• 2 top ASX dividend shares for income in 2020
• 2 quality ASX dividend shares to buy today

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ansell Ltd. 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.

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The S&P/ASX 200 Index (ASX: XJO) has bounced back strongly on Tuesday and is up over 3% in early trade.

This follows a positive night of trade on U.S. markets which saw both the Dow Jones and Nasdaq indices recover from an early sell off to record solid gains.

While a large number of ASX 200 shares are pushing higher today, one standout has been the Afterpay Ltd (ASX: APT) share price.

In morning trade the payments company’s shares have rocketed almost 8% higher to a new record high of $55.19.

It isn’t just Afterpay on the rise today. The Zip Co Ltd (ASX: Z1P) share price is also up 8% to $6.26 at the time of writing. This puts it within sight of its record high of $6.97.

Today’s gains mean that Afterpay’s shares are now up 590% from their March low and Zip’s shares are up almost 500% from their March low.

This has been driven by impressive sales and customer growth by both companies and the avoidance of a deterioration in bad debt levels during the pandemic. These positive metrics appear to have convinced the market that their business models are far more robust that many gave them credit for.

Can Afterpay and Zip shares go higher?

While the short term performance of their shares is difficult to predict, I believe over the long term their shares can go materially higher from here.

Thanks to international expansion, the increasing popularity of the payment method, and their massive market opportunities, I feel both companies are well-positioned to deliver very strong sales growth for many years to come.

Though, given the premium their shares trade at and the risks involved, I would suggest investors try to limit an investment in either of their shares to just a small part of a balanced portfolio.

I’m not alone in thinking they could be good options for investors. Earlier this month Morgans placed an add rating and $7.00 price target on Zip’s shares and Bell Potter put a buy rating and $65.00 price target on Afterpay’s shares.

More reading

• Is the Altium share price the steal of the century?
• The top ASX growth shares I would buy for the 2020s
• The Afterpay share price is up 580% from its March low
• Got $5,000 spare? Consider Wesfarmers shares and these 2 other ASX companies
• Keep a watch on the Zip Co share price and 1 other ASX tech this June

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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 Afterpay and Zip shares are rocketing higher today: Can they go even higher? appeared first on Motley Fool Australia.

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If you’re looking to invest $1,000 into the Australian share market, then there are a lot of quality options for investors to choose from.

To narrow things down, I have picked out two ASX 200 shares that I think would be smart choices for investors. Here’s why I like them:

Aristocrat Leisure Limited (ASX: ALL)

I think Aristocrat Leisure would be a great place to invest $1,000 right now. Especially with its shares down 35% from their 52-week high. While a pullback in its share price has not been unwarranted considering the negative impact of the pandemic on its business, I think the selloff has been overdone.

Aristocrat Leisure’s shares are currently changing hands at 21x estimated FY 2021 earnings. I think this is great value given its very positive long term outlook. This is thanks to its leading pokie machine business and its lucrative digital business which is generating significant recurring revenues from its millions of daily active users. Combined, I believe they will underpin solid earnings growth over the next decade.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Another ASX share which I think investors ought to consider investing $1,000 into is Domino’s. I believe the pizza chain operator is one of the best buy and hold options on the Australian share market. This is thanks to its positive long term outlook due to its expansion plans and management’s same store sales targets.

Over the next five years Domino’s is aiming to deliver annual same store sales growth of 3% to 6% and annual organic new store additions of 7% to 9%. And while there is a risk that new store openings will suffer during the pandemic, I’m confident the company will soon catch up with its target. Overall, I expect this winning combination of organic and inorganic growth to underpin strong earnings growth over the next decade.

More reading

• Coles shares and 2 other ASX 200 companies to buy in the current market
• The Santos share price is down 36%! This is what I’d do today
• Is the Altium share price the steal of the century?
• I think Aristocrat shares are outstanding value
• Got $3,000? These 5 beaten-down ASX shares are begging to be bought

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Investing $1,000 into these ASX 200 shares could be a smart move appeared first on Motley Fool Australia.

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