2 cheap ASX shares to buy with impressive growth

The 2 ASX shares in this article could be cheap and worth looking at, including Nick Scali Limited (ASX:NCK) and Accent Group Ltd (ASX:AX1).

| More on:
A piggy bank is surround by hands preparing to pay coins into the slot, representing a company capital raisingh in asx share price represented by multiple hands all placing coins in a piggy bank

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There are some ASX shares that could be cheap and may be worth looking at.

One of the most common ways that investors try to compare different investments is by looking at the price / earnings ratio (P/E ratio). The lower it is, the cheaper it is, though that doesn't necessarily give the best indication of value.

However, there are some businesses that are growing quickly yet are valued at a relatively low p/e ratio compared to other companies and sectors.

Here are two that fit that description:

Accent Group Ltd (ASX: AX1)

Accent is an ASX retail share that sells a large array of different shoe brands from its different stores. Its flagship chain of retail outlets is called The Athlete's Foot.

Like plenty of other retail shares, the company is experiencing high levels of growth in these strange times due to COVID-19.

In the recent FY21 half-year result, total sales went up by 6.6% to $541.3 million. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) went up by 44% to $97.5 million, earnings before interest and tax (EBIT) grew by 47.3% to $81.8 million and earnings per share (EPS) rose 56.9% to 9.76 cents.

This result was driven by a 110% increase of online sales to $108.1 million, which represented 22.3% of total sales.

The strong result allowed the company to pay a record ordinary interim dividend of 8 cents per share, up 52.4% compared to the prior corresponding period.

In the first eight weeks of FY21, like for like sales were up 10.7%, whilst digital sales were up 65.4%.

The Accent CEO Daniel Agostinelli said:

Accent's integrated digital capability, large and growing store network, strong portfolio of exclusive distributed brands and emerging capability in building new business formats and vertical products continues to drive strong sales and margin growth. The management team remains focused on driving digital growth and innovation. With long-term objectives and incentives linked to driving at least 10% compound EPS growth, Accent continues to be defined by strong cash conversion and the consistently strong returns it delivers on shareholders' funds.

According to Commsec, the Accent share price is valued at 16x FY21's estimated earnings.    

Nick Scali Limited (ASX: NCK)

Citi currently rates Nick Scali as a buy and has a share price target of $12.05.

Furniture business Nick Scali is seeing record levels with its order book, which is an indicator of future revenue and potential profit. The sales order growth in January 2021 was up 47%, representing the largest month of written sales orders in the company's history.

The furniture business said that in the first six months of FY21 its sales revenue climbed 24.4% to $171.1 million, with pre-AASB16 EBITDA jumping 94.2% to $60.2 million and EBIT doubling to $57.7 million.

Nick Scali's margins climbed substantially during the six-month period, with the gross profit margin increasing by 180 basis points to 64% and the EBIT margin growing by 1,270 basis points to 33.6%.

Underlying EPS doubled to 50 cents, allowing the board to increase the interim dividend by 60% to 40 cents per share.

Nick Scali has its eyes on the online growth potential. The company said in the half it saw $8.8 million of written sales orders, with an EBIT contribution of $3.5 million. It now expects to significantly exceed the $4 million contribution previously forecast for the full year. The company also said:

There remains significant scope for growth in the online segment, via adjacent product opportunities as well as continuing to build Nick Scali's online offering in New Zealand. Investment in the capability is underway with further updates expected in the second half of FY21.

According to Citi, the Nick Scali share price is trading at 11x FY21's estimated earnings with a projected grossed-up dividend yield of 11%.

Should you invest $1,000 in Accent Group Limited right now?

Before you buy Accent Group Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Accent Group Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 6 March 2025

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Cheap Shares

A young boy points and smiles as he eats fried chicken.
Cheap Shares

Why these brokers are bullish on this ASX 200 stock

Investors need to know about this share which brokers view as a tasty opportunity.

Read more »

Ecstatic woman looking at her phone outside with her fist pumped.
Cheap Shares

Brokers rate these 2 top ASX 200 shares as buys right now

These stocks are rated as buys by UBS. Here’s why.

Read more »

A senior couple sets at a table looking at documents as a professional looking woman sits alongside them as if giving retirement and investing advice.
Value Investing

Forecast earnings growth of 10% a year but down 11%, is now the time for me to consider this ASX 200 high-flyer?

Despite recent good news, the shares are down...

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Cheap Shares

A leading fund manager is excited by these 2 undervalued ASX shares

Here’s why investors can feel bullish about these stocks.

Read more »

Broker looking at the share price on her laptop with green and red points in the background.
Cheap Shares

Leading fund manager bullish on these 2 exciting ASX 200 shares

These buy-rated stocks have a compelling future.

Read more »

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Cheap Shares

These cheap ASX 200 shares could rise 30% to 35%

Analysts have good things to say about these beaten down shares.

Read more »

A young woman drinking coffee in a cafe smiles as she checks her phone.
Cheap Shares

The 2 best ASX shares to buy before they recover

Goldman Sachs has put buy ratings on these beaten down stocks.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Cheap Shares

I think these 2 cheap ASX shares are buys for value investors

These stocks look attractively cheap. Here’s why.

Read more »