There are some very wonderful ASX shares that look like they could be good buys next week for the long-term.
I am always on the lookout for ASX shares which have growth potential for many years to come and also look good value. That doesn’t mean they’re ‘cheap’, just that the quality and growth on offer seem attractive.
That’s why I like the look of these two:
Adairs Ltd (ASX: ADH)
I think that Adairs offers a very compelling combination of dividends and profit growth, which could lead to good total returns.
The homewares and furnishings business has made what seems like a very smart acquisition of Focus on Furniture, leading to good synergies between the two. It also has an attractive roadmap of growth with a national store rollout.
This ASX share is rapidly growing its online sales, showing it has been able to adapt to the new operating environment where more customers want to buy products online. E-commerce can often come with higher profit margins.
I also like the prospect of Adairs’ plan to open more large stores, which are much more profitable. At the recent AGM, it said that its store sales are highly correlated to store floor space. It’s expecting to grow floor space by 8%+ in FY22 and by 5%+ per year over the next five years.
CommSec estimates say that Adairs is priced at 9 times the estimated earnings for FY23, as well as having a potential 10.6% dividend yield (including the franking credits).
Redbubble Ltd (ASX: RBL)
Redbubble is one of the leading ASX e-commerce shares in my opinion. It operates two leading platforms – Redbubble and TeePublic. It has a goal of creating the world’s largest marketplace for independent artists where products with their cool designs can be purchased.
This ASX share says that it’s operating in a huge potential market, which is why it’s investing so much to try to grow as much as it can.
Just in its core markets, the e-commerce spending in addressable product categories is expected to grow from US$300 billion in 2020 to US$400 billion by 2024. If Redbubble just kept its same market share (which is small compared to those addressable numbers), that’s a potential revenue increase of 33%. The rest of the world is also a huge opportunity to tap into.
Whilst FY22 may not show a lot of short-term growth (due to the huge e-commerce boom in FY21), I think the longer-term looks very promising, particularly if it expands into new product categories and grows in new geographies.
I think the company has the potential of achieving attractive, growing profit margins thanks to the operating model of an e-commerce business. However, the Redbubble share price has dropped 26% over the last two months.
