2 high-quality ASX stocks to buy as the tariff sell-off worsens

These stocks look too good to ignore.

| More on:
A senior pharmacist talks to a customer at the counter in a shop.

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

Numerous high-quality ASX stocks have been sold-off in recent weeks as markets become more fearful about the impacts and knock-on effects of the US tariffs on trade partners, and how that may impact economies and company profits.

It's not often that we see the ASX's best businesses suffer double-digit declines of their share prices. But, when it does happen, it's definitely worth taking advantage of, in my view.

If I had a huge pile of cash to invest, there are plenty of stocks I'd want to buy. While I am investing this week, there are (at least) two that I'm probably not going to be able to capitalise on in the short term. However, I want to highlight the below stocks as long-term opportunities.

TechnologyOne (ASX: TNE)

This company has a global software as a service (SaaS) enterprise resource planning (ERP) offering. It has more than 1,300 subscribers across businesses, government agencies, local councils, and universities.

The TechnologyOne share price has dropped 16% since 11 February 2025, making it seem noticeably better value in terms of the price-earnings (P/E) ratio.

Created with Highcharts 11.4.3Technology One PriceZoom1M3M6MYTD1Y5Y10YALL10 Feb 202512 Mar 2025Zoom ▾10 Feb10 …12 Feb14 Feb16 Feb18 Feb20 Feb22 Feb24 Feb26 Feb28 Feb2 Mar4 Mar6 Mar8 Mar10 Mar12 Mar12 …10 Feb10 Feb17 Feb17 Feb24 Feb24 Feb3 Mar3 Mar10 Mar10 Marwww.fool.com.au

According to the forecasts on Commsec, the TechnologyOne share price is now valued at 43x FY27's estimated earnings.

One of the most powerful things about the company's operating model is that it has a retention rate of more than 99%, so clients clearly like the product and they stay for the long term. The high-quality ASX stock is regularly investing to improve the software, which helps unlock further revenue growth for the company. It aims for 15% overall revenue growth from its existing client base each year – that's a strong organic growth rate.

The business expects to surpass $500 million of annual recurring revenue (ARR) in the first half of FY25 and it's aiming for at least $1 billion of ARR by FY30. In five years, its ARR could double, which could bring sizeable profit margin improvements.

Its growth in the UK and potential future acquisitions are additional growth levers that could boost the business further.

Sigma Healthcare Ltd (ASX: SIG)

I'm most excited about this company because it owns Chemist Warehouse, the largest pharmacy business in Australia. It also owns My Chemist, Amcal, and Discount Drug Stores.

The business is benefiting from a number tailwinds, including an ageing population, new healthcare products, growth in value-added services, and overall higher spending on healthcare.

Chemist Warehouse grew its operating profit (EBIT) by 35% in the first half of FY25 and I think its profit could continue climbing if the company continues investing in growing its store network in Australia and overseas, as well as achieving synergies following the merger with Sigma Healthcare.

If the company can deliver growth in Europe, the Middle East and Asia, its profit could rise significantly. I think the high-quality ASX stock is compelling after falling 16% from 17 February 2025.

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 Technology One. The Motley Fool Australia has recommended Technology One. 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 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 »

A young couple sits at their kitchen table looking at documents with a laptop open in front of them.
Opinions

Why I'd buy these top ASX 200 shares next

Growing businesses are compelling. These two are growing significantly.

Read more »