Are these beaten-up ASX shares too cheap to ignore?

I'm seeing value in these two stocks.

| More on:
a man and a woman kneel in a boxing ring with exaggerated make-up injuries, posing in humorous stance with the woman leaning back on her knees and the man leaning against her bright pink boxing glove as he gasps for air.

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

I love looking at opportunities that have been sold off because they offer the potential to buy the dip. Some S&P/ASX 200 Index (ASX: XJO) shares could be a bargain amid recent volatility.

When businesses have long-term potential but suffer a short-term valuation decline, it could suggest it's an opportunistic time to buy.

Some industries, such as ASX retail shares and ASX mining shares, can behave quite cyclically, giving us a chance to buy at a temporarily lower price.

With that in mind, I think the two ASX shares below are worth scrutinising.

Super Retail Group Ltd (ASX: SUL)

Super Retail is one of the largest retailers in Australia with four key brands – Supercheap Auto, Rebel, BCF and Macpac.

The chart below shows that the Super Retail share price has fallen more than 20% since 20 February 2024.

Created with Highcharts 11.4.3Super Retail Group PriceZoom1M3M6MYTD1Y5Y10YALL20 Feb 20249 Jun 2024Zoom ▾4 Mar18 Mar1 Apr15 Apr29 Apr13 May27 MayMar '24Mar '24Apr '24Apr '24May '24May '24Jun '24Jun '24www.fool.com.au

Why the negativity? The company said in an update that sales have slowed, with total sales in the second half of FY24 showing a negative year-over-year change. According to Super Retail, in the second half of FY24, total like-for-like sales were down 1%, with Rebel sales down 2% and BCF sales down 5%.

However, the company revealed some positives – group sales across March and April were up approximately 1% year over year. Supercheap Auto benefited from "strong demand in auto maintenance categories", Rebel footwear sales improved after introducing new and expanded brand ranges, and Macpac sales growth was "driven by a strong performance in New Zealand."

The increase in wages and other costs is a headwind for the business' profitability, but I don't believe it will last forever. The company said in its May trading update that store foot traffic and transaction volumes "continue to grow", which is a positive.

It has opened 16 net new stores during FY24 to date, with expectations of opening another seven before the end of FY24. I think this bodes well for future revenue growth, once trading conditions improve on a per-store basis.

According to Commsec, the Super Retail share price is valued at just 12x FY24's estimated earnings.

Sandfire Resources Ltd (ASX: SFR)

Sandfire is one of the larger ASX copper shares, with a market capitalisation of approximately $4 billion. It's a global miner, with projects in Western Australia, Spain and Botswana.

Copper is an important decarbonisation resource that's useful because it conducts electricity well. For example, electric vehicles need more copper than traditional vehicles. Copper is also needed for the expansion of the electrical grid and the manufacture of renewable energy generation like wind.

McKinsey research suggests there could be a 6.5 million metric ton deficit between supply and demand by 2031, which translates into a 20% deficit in percentage terms. I think this could provide strong support for the copper price and Sandfire's earnings over the next decade.

As shown on the chart below, the Sandfire share price is down around 10% since 20 May 2024, following a decline in the copper price over the same time period.

Created with Highcharts 11.4.3Sandfire Resources PriceZoom1M3M6MYTD1Y5Y10YALL20 May 20249 Jun 2024Zoom ▾20 May22 May24 May26 May28 May30 May1 Jun3 Jun5 Jun7 Jun9 Jun20 May20 May27 May27 May3 Jun3 Junwww.fool.com.au

I think this could be an opportunity to invest in the ASX 200 share at a lower price.  

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 Super Retail Group. The Motley Fool Australia has positions in and has recommended Super Retail Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Opinions

a man in a business suit sits at his laptop computer at his desk and smiles broadly in an office setting, giving an air of optimism and confidence.
Opinions

This ASX 200 share has made the most money for my portfolio. I'm expecting a lot more

There’s one key reason why I’m expecting strong growth from this stock.

Read more »

A woman with a mobile phone in her hand looks sceptical with a puzzled expression on her face with an eyebrow raised and pursed lips.
Opinions

Is it time to be bullish or cautious on buying ASX shares right now?

Should investors be greedy or fearful as FY26 approaches?

Read more »

A happy young woman in a red t-shirt hold up two delicious burritos.
Opinions

Bull vs. Bear: Guzman Y Gomez shares

Guzman Y Gomez shares peaked at $45.99 in February and closed at $28.04 yesterday. Where to now?

Read more »

A businessman hugs his computer and smiles.
Opinions

3 ASX 200 shares to buy and hold forever

I don't expect these stocks to go out of style anytime soon.

Read more »

A young woman with tattoos puts both thumbs down and scrunches her face.
Opinions

2 ASX shares I'm avoiding in today's uncertain market

I wouldn't touch these two stocks if you paid me right now.

Read more »

Smiling elderly couple looking at their superannuation account, symbolising retirement.
Opinions

Aiming for rock-solid retirement income? I'd buy these two ASX shares

These stocks have impressive dividend credentials.

Read more »

a smiling picture of legendary US investment guru Warren Buffett.
Opinions

Would Warren Buffett buy Soul Patts shares?

Soul Patts is an impressive business. But would it appeal to one of the world’s greatest investors?

Read more »

asx share price growth represented by hand holding hourglass surrounded by dollar signs
Opinions

'Patience isn't passive': Expert reveals 2 ASX shares his team won and lost on

They say patience is a virtue. This asset manager says it can also determine your investment success.

Read more »