Why I think these 2 ASX shares are bargain buys

In the world of quality cyclical shares, what goes down typically will bounce back up again.

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Some of the best opportunities on the Australian stock market could be cyclical ASX shares that are trading at near multi-year lows.

In certain industries, such as mining, retail, and agriculture, I'd expect to see profit, dividends, and share prices fluctuate significantly over the years.

With the share prices of some cyclical companies hitting lows, I'm hoping for a big recovery over the next few years. Now, I can't predict a turnaround within a particular timeframe, but I'm highlighting that now could be the right time to invest at a low price.

Let's get into which businesses I see as opportunities.

Elders Ltd (ASX: ELD)

According to the company, Elders has played an important role in the agricultural sector since 1839. It offers farmers links to markets, tailored advice, and specialist knowledge across a range of products and services, including farm supplies, agronomy, livestock, wool, grain, finance, insurance, and real estate.

The Elders share price has fallen 25% since 13 September 2024 and 50% from April 2022. Few businesses worth more than $1 billion have fallen as much in the same time period.

Created with Highcharts 11.4.3Elders PriceZoom1M3M6MYTD1Y5Y10YALL1 Apr 202229 Jan 2025Zoom ▾May '22Sep '22Jan '23May '23Sep '23Jan '24May '24Sep '24Jan '25Jul '22Jul '22Jan '23Jan '23Jul '23Jul '23Jan '24Jan '24Jul '24Jul '24Jan '25Jan…Jan '25Jan…www.fool.com.au

Elders is facing a number of headwinds including impacted livestock volumes in FY25 from dry conditions in South Australia and Victoria. Interest rate pressures remain a headwind in the real estate segment, affecting regional residential property demand. Some of the headwinds are ongoing from FY24, which saw underlying net profit sink 38% to $63 million.

Which is why I think now could be the right time to invest at a lower price and patiently wait for a recovery.

One of the main reasons I think this is an appealing ASX share is that it's making acquisitions to boost its scale and offerings.

In November, the ASX announced it was buying Delta Agribusiness for $475 million. Delta provides rural products and services through a network of 68 locations. The acquisition further diversifies Elders' geographic reach, enhances Elders' expertise, and improves its offering in agricultural tech and precision agriculture. In the 12 months to June 2024, Delta made $835 million of revenue and $53 million of EBITDA.

Metcash Ltd (ASX: MTS)

This business has three segments. Its food division supplies IGA supermarkets around the country, and its business-to-business division has clients like cafes and hotels. The Metcash liquor segment supplies independent liquor retailers such as Cellarbrations, The Bottle-O, IGA Liquor and Porters Liquor.

Metcash also has a hardware division that includes Mitre 10, Home Hardware, Total Tools, and Alpine Truss.

The Metcash share price has fallen more than 30% since April 2022, and it's down more than 12% since March 2024.

Created with Highcharts 11.4.3Metcash PriceZoom1M3M6MYTD1Y5Y10YALL1 Apr 202229 Jan 2025Zoom ▾May '22Sep '22Jan '23May '23Sep '23Jan '24May '24Sep '24Jan '25Jul '22Jul '22Jan '23Jan '23Jul '23Jul '23Jan '24Jan '24Jul '24Jul '24Jan '25Jan…Jan '25Jan…www.fool.com.au

The ASX share's hardware division is suffering amid challenging conditions for construction activity, largely due to high interest rates. I think it could be wise to jump on the business at this low price before conditions (hopefully) improve within the next year or two. An RBA rate rise could be a significant catalyst for the business.

I believe Metcash's food earnings can continue to support the overall profit and can help it pay a sizeable dividend until hardware earnings recover.

According to the forecasts on Commsec, the Metcash share price is trading at (a cheap) 12.5x FY25's estimated earnings with a possible grossed-up dividend yield of 7.8%, including franking credits.

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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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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