During routine analysis on the weekend, 2 absolute fantastic S&P/ASX 200 Index (ASX: XJO) shares jumped out at me. I had previously written these off as far too expensive and turned my attention elsewhere. Both of these ASX 200 value shares have been among the best performing shares of the decade, increasing their share price by at least 10 times in the past 10 years.
This is a unique window in time where shares of this calibre are available at what I believe are discount prices.
Altium Limited (ASX: ALU)
Between 2010 and now, Altium has been one of the outperforming ASX 200 value shares, with its share price returning over 146 times the initial investment. That means a $10,000 investment 10 years ago would have become over $1.4 million today. This is not a company that is built on smoke or vapour – Altium develops software for the printed circuit board (PCB) design industries.
Over a 10-year period, it has achieved compound annual growth rates (CAGR) that are the envy of most organisations. It is clear Altium is a company built on solid technological foundations, managed with steel-like discipline. This includes a 10-year sales CAGR of 16.4%, an 8 year earnings per share (EPS) CAGR of 30.3%, and a cashflow CAGR of 39.3%. Over the past 5 years, using a USD to AUD conversion rate of $0.72, the company has an average return on capital employed (ROCE) of 20%.
This is an organisation that knows how to turn capital into profits.
The company is sitting on a current price-to-earnings (P/E) ratio of 60, which immediately sounds high. It is way over the company's 10-year average P/E of 23. However, when you factor in the compound growth rates I have mentioned with a horizon of 10 years, then the share price appears to be at a discount.
Personally, even if it was selling at a small premium I would be interested in owning this ASX 200 value share. Even with the recent hit from the coronavirus, it clearly has a long runway ahead of it.
Domino's Pizza Enterprises Ltd. (ASX: DMP)
Everyone knows Domino's. Most readers have probably bought from Domino's. We know the taste, the buying experience, the usefulness of the app. And for many of us, we know that we automatically choose Domino's Pizza. It isn't a thought-through process. This is what makes it one of the great ASX 200 value shares.
Like Altium, Domino's was an outperforming share during the past decade, returning 12 times the initial purchase price. It has a sales CAGR of 21.9% and shows no signs of slowing, with last years sales growth exceeding that of the previous 2 years. Its 10-year cashflow CAGR is 22.3% and it has a 10-year EPS CAGR of 21.4%. Also like Altium, the company has demonstrated an ability to turn capital into profits, averaging a ROCE of 19% over the past 4 years.
On paper, its P/E is 39.16. That's 9 points higher than its 10-year average. However, over a 10-year investing horizon and based on the above CAGRs, I believe it is selling at a discount.
Foolish takeaway
When searching for ASX 200 value shares it is important to dig a bit deeper than the initial summary statistics. If you were to look at headlines and P/E ratios alone, you will never have a full measure of an organisations true worth.
