After falling 62%, this leading ASX 200 share could be gearing up for growth!

The S&P/ASX 200 Index (ASX: XJO) share Audinate Group Ltd (ASX: AD8) has suffered a massive decline this year. It has dropped a painful 62% from its 2024 peak. Ouch. The chart below shows the pain for shareholders.

But, I do believe the company is priced too cheaply for its long-term prospects. So, I'm considering buying some shares before it starts reporting good growth again.

Audinate may not be the most-well known company to investors, but it claims to be the leading provider of professional AV networking technologies globally. Its Dante platform distributes digital audio and video signals over computer networks, and is designed to bring the "benefits of IT networking to the professional AV industry", typically with lower costs.

There are a few reasons why I think the ASX 200 share is a good buy right now, so let's dive into those.

Short-term issues?

I think investors can make very fruitful returns if they invest in ASX 200 shares that are going through temporary problems but are being priced as though the difficulties are permanent.

The 62% sell-off of the Audinate share price is a major sell-off. It's a very similar-sized decline to when COVID-19 fears hit the market in March 2020, when concerts, in-person conferences, sporting events, and various other events needing audiovisual services were cancelled.

But I do not think Audinate is facing problems anywhere near the same size.

In the first quarter of FY25, the business said it made US$7.2 million of gross profit due to several headwinds, including "shorter order lead times, increased inventory across the industry, slower clearance of raw material inventories by our manufacturing customers, and softer than expected demand from end-users."

Those headwinds are expected to continue into the second quarter of FY25.

Audinate itself said that it expects the impact of manufacturing customers working through their inventory to only last a year and return to growth in FY26 with more normal customer order patterns.

Long-term potential of the Audinate share price

The company has more than six million Dante devices in the market, with more than 1 million added annually.

Audinate suggests that as its installed base expands, there will be a growing opportunity to build a platform software business to help AV professionals manage and monitor their installations. In FY24, its software revenue grew by 32.75% to $15.4 million.

The ASX 200 share also noted that the demand for Dante continues to grow as manufacturers develop new Dante products and AV system designers and installers "increasingly choose Dante solutions." Design wins in the first quarter of FY25 were up 22% year over year, which is a "leading indicator of future revenue growth".

I think the business is primed for good earnings growth after FY25. It may be the next ASX 200 share investment I make, particularly if it can continue to deliver operating leverage (rising profit margins) as it did up to FY24.

The post After falling 62%, this leading ASX 200 share could be gearing up for growth! appeared first on The Motley Fool Australia.

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 Audinate Group. The Motley Fool Australia has positions in and has recommended Audinate Group. 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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