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Some ASX shares may have been sold off too much.
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I think there are a few ASX shares that have been hit hard during 2022 that may be long-term opportunities at these prices.
It’s certainly possible that a handful of businesses may have seen their share prices fall too hard.
When things are oversold, I think they could be attractive ideas, particularly if they have long-term potential.
No one can know what a share price is going to do next. But, I think these two ASX shares could be investments to think about because of the value they offer at this lower price.
Nick Scali is an ASX retail share that sells furniture from a national network of stores. It also recently acquired the Plush-Think Sofas business.
At the time of writing, the Nick Scali share price has fallen by around 38% in 2022.
Although the company’s shares have recovered in recent weeks, the business still looks like good value for the long term, in my opinion.
Things are indeed looking a bit tough in the shorter term for retailers, but investing is about more than what happens in just the next 12 months.
I think after this period of high inflation and rising interest rates ends, the outlook for Nick Scali will improve, and therefore investor sentiment can recover somewhat.
FY22 was affected by store closures due to COVID lockdowns, as well as lockdowns in product sourcing locations and shipping container availability. FY23 will hopefully not have those negative impacts.
Besides that, there are other long-term positives. With the acquisition of Plush, there is the potential for store network expansion, enhanced group buying power, aligned distribution, and so on.
The ASX retail share can also add more Nick Scali stores to help grow its profit. Online sales growth could also help. Nick Scali online revenue was $13.7 million and it contributed $8 million of earnings before interest and tax (EBIT). With this good profit margin, it will help the company if and when more sales occur online.
Finally, Nick Scali usually pays a generous dividend yield. The dividend estimate on CMC Markets for FY23 suggests a grossed-up dividend yield of 9.6%.
ASX share Volpara Health Technologies offers a range of software relating to breast screening and risk analysis.
The Volpara share price has fallen by more than 40% since 25 October 2021.
I think the business has a very promising future by offering clients an increasingly valuable service by being able to analyse images and detect cancer as early as possible.
In my opinion, the business has several attractive features. It has a high gross profit margin of around 90%. In the FY23 first quarter, it saw good growth with subscription-based cash receipts up 36% to NZ$8.3 million. It has annual recurring revenue (ARR) of around NZ$27.1 million. Customer loss remains “low”.
Around 35% of women in the United States have a Volpara product applied on their images and data.
The company is looking to become cash flow breakeven by the end of FY24.
It has good foundations, in my opinion. If the company keeps growing quickly, scale will help it generate a good bottom line in the future.
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 FPO NZ. The Motley Fool Australia has positions in and has recommended VOLPARA FPO NZ. 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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