ASX shares are experiencing a downturn on Friday, with the benchmark S&P/ASX 200 Index (ASX: XJO) down 2% at the time of writing.
The spillover has extended into many high-quality ASX that have excellent economic characteristics with equally great prospects moving forward.
Such is the beauty of the stock market – its volatility allows us, the investor, to purchase outstanding businesses at mouth-watering prices.
Despite the broader market decline today, three businesses stand out as potential long-term buys, in my opinion. Let's dive into why Macquarie Group Ltd (ASX: MQG), CSL Ltd (ASX: CSL), and Wesfarmers Ltd (ASX: WES) could be solid additions to your portfolio.
Macquarie shares pull back
Macquarie shares are down more than 2% at the time of writing and are swapping hands at $206.54 apiece.
Whilst the bank has not released any market-sensitive updates today, this decline follows the release of its latest quarterly update, which didn't quite meet investor expectations.
Macquarie reported that its first-quarter group contribution for FY25 was flat compared to the prior corresponding period.
Growth in its asset management and banking and financial services (BFS) divisions, which are considered 'annuity-style businesses', was also flat year over year.
The BFS division saw volume growth and lower operating expenses but faced net interest margin compression. Meanwhile, the timing of performance fees impacted the asset management division's earnings.
Macquarie's markets and trading businesses, including commodities and global markets, and Macquarie Capital, reported a decrease in net profit.
UBS noted the results were softer than first expected. Despite this, it believes the ASX share has the potential to "deliver investment gains" from renewable energy assets. It projects $10.65 in earnings per share (EPS) for FY25 and $12.14 for FY26.
These call for growth rates of 17% and 14%, respectively.
At the current price-earnings ratio (P/E) of 23 times, if investors continue to pay this multiple, this implies a price target of $279 per share (23 x $12.14 = $279).
Should the multiple contract sharply, say 20 times, this implies a price target of $242. This is an attractive risk-reward.
Blue chip ASX share with growth potential
CSL shares are down 2% today and are trading at $305.11 apiece. Despite the broader market's downturn on Friday, the ASX share has gained almost 16% over the past 12 months.
The biotech giant is known for its consistent business performance. It grew revenues 11% year over year to US$8.05 billion and net profit after tax (NPAT) 20% to US$1.94 billion in H1 FY24.
CSL's plasma collection technology is expected to reduce collection times, according to Red Leaf Securities. This could potentially improve operating margins.
The rollout is reportedly progressing faster than market expectations, Red Leaf says, which could "yield significant margin improvements".
Consensus puts the ASX share as a buy, according to CommSec. The company will post its FY24 results this month. In my opinion, it is well positioned to continue its earnings growth – which Baker Young analysts estimate to be 21% per year until FY26.
There are also a handful of analysts, which we'll call the "$500 club," who have set a $500 price target for the ASX share. I can't say I'm offended by this.
Diversified revenue streams
Wesfarmers is third on the list of ASX shares on my radar today. They have risen sharply over the past 12 months and are currently trading at $72.02 apiece – down more than 2% on Friday.
In my estimation, Wesfarmers' diverse operations in retail, healthcare, and chemicals provide a robust foundation for growth.
The company's portfolio includes well-known brands such as Bunnings, Kmart, and Priceline Pharmacy.
Bunnings and Kmart contribute significantly to Wesfarmers' revenue and earnings. They are the "crown jewels", I guess you could say. Despite thin profit margins, the high sales volumes and excellent returns on capital make these divisions standout performers, in my opinion.
Wesfarmers' dividend policy is also attractive to income-focused investors. The company recently increased its dividend by 3.4% to 91 cents per share, with further growth expected.
Despite trading at a higher price-earnings ratio (P/E) compared to its historical average, Wesfarmers' strong performance and potential for growth could still make it a compelling buy, in my view.
UBS is bullish on the ASX share and hopes for a net profit of $2.56 billion from the conglomerate in FY24, growing 19% per year until FY26. This implies earnings per share of $2.26.
This kind of earnings growth is attractive to me.
Foolish takeaway
While ASX shares are experiencing a downturn on Friday, Macquarie Group, CSL, and Wesfarmers each present compelling investment opportunities, in my opinion.
The combination of fundamentals and growth prospects at reasonable valuations could make them worth a look for your portfolio. Just remember that past performance is no guarantee of future results, so conduct your own due diligence and talk to a professional when needed.
