I'm feeling optimistic about the valuations of some S&P/ASX 200 Index (ASX: XJO) shares. The lower the share prices go, the more attractive a good business looks.
It's certainly true that the outlook doesn't look as rosy as it did a year ago. Interest rates are much higher. Prices are now a lot higher after inflation. Things are uncertain, but I think that's when the best opportunities are found.
I like the look of businesses that have been growing their operations over the long term, with further long-term growth planned. These are two of the ASX 200 shares I'm bullish about.
Cleanaway Waste Management Ltd (ASX: CWY)
Cleanaway describes itself as Australia's "leading total waste management, industrial and environmental services company". It has the "largest waste, recycling and liquids collections fleets on the road", with a network of recycling facilities, transfer stations, engineered landfills, liquids treatment plants and refineries.
Since 21 April 2022, the Cleanaway share price has fallen around 25%, making it much cheaper. It has been hurt by a number of impacts including floods, higher costs and so on. But, I don't think the negative environment is going to last forever.
Over the rest of FY23, the business is expecting underlying growth and ongoing execution of its 2030 initiatives. It's expecting margins are going to recover in the second half of FY23, with an improvement in labour availability and efficiency. It's expecting earnings before interest and tax (EBIT) to be around $300 million.
I think Cleanaway's earnings can grow in the long term as the Australian population increases and more of a household's waste is recycled.
Commsec numbers suggest that the FY24 earnings per share (EPS) could be 9 cents and in FY25 it could be 10.6 cents. This means the Cleanaway share price could be valued at 23 times FY25's estimated earnings.
Premier Investments Limited (ASX: PMV)
Premier Investments is an ASX 200 retail share that owns a number of brands including Smiggle, Peter Alexander, Dotti, Just Jeans, Jay Jays and Portmans. It also has investments in Breville Group Ltd (ASX: BRG) and Myer Holdings Ltd (ASX: MYR).
The Premier Investments share price has fallen over 10% since 9 March 2023, despite the company's positive updates. It recently said that Premier's global retail sales for the first 17 weeks of the FY23 first half were up 23.6%. That's impressive growth in my opinion.
It's doing a great job of growing the Smiggle business, which sells children's items like bags, stationery and so on with branding on them from the AFL, Harry Potter and Disney. The return to school has been a very helpful boost for the business.
Over the long term, the business is looking to grow its online sales, which are typically more profitable than what is sold in-store.
The ASX 200 share has been steadily increasing its ownership of Myer, which is interesting considering the long-term commentary about the demise of department stores. However, Myer has really turned things around – the Myer profit is soaring and the Myer share price is up around 70% in the last year.
I think that the potential of its global sales to increase (through names like Smiggle and Breville) gives it plenty of growth potential.
