Buy these 2 undervalued ASX shares in December, says expert

I believe it's always possible to find opportunities in the ASX share market as company share prices constantly fluctuate.

And if a company can beat the market's return, then it could be worth owning, in my view.

The more undervalued a business is, the higher the return could be or the higher the margin of safety we're giving ourselves.  

Here are two ASX shares the broker UBS considers undervalued and rates as buys. Let's get into it.

Siteminder Ltd (ASX: SDR)

UBS currently rates hotel software provider Siteminder as a buy, with a price target of $6.20. A price target suggests where the broker thinks the business will be trading in 12 months from the time of the investment call on the company.

The broker expects Siteminder's revenue to rise 24% in FY25 and 23% in FY26. A business growing revenue at that pace could be an appealing investment option.

Based on the company's FY24 results, UBS sees "good growth potential from new products" and product enhancements. The broker also expects Siteminder to "gain efficiencies in new markets and product segments."

Detailing why the underlying business was performing well, UBS said:

In our view, the underlying business continues to track well, with a focus on adding larger hotels, growing share of customer wallet, increasing Transaction penetration and a pipeline of new product launches to potentially support targeted 30% org[anic] annual rev[enue] growth [in the] medium-term.

By FY29, UBS expects the ASX share to generate $485 million in revenue and $61 million in net profit after tax (NPAT).

Select Harvests Ltd (ASX: SHV)

Select Harvests is one of Australia's largest almond producers. It grows almonds in seven regions across southern New South Wales, northern Victoria and eastern South Australia and has food processing facilities.

UBS rates Select Harvests as a buy, with a price target of $4.40.

The broker believes that the almond price outlook is promising, with price momentum looking "set to persist". It predicts the almond price will be $8.50 per kilo, up from its forecast of $8.10 in FY25 and $8.20 per kilo in FY26.

This is more than market expectations, with the long-term average at $8 per kilo.

UBS pointed to very positive recent industry feedback in its optimistic thoughts about the ASX share:

Our recent industry discussions regarding the Californian almond sector have been the most positive for SHV in years: 1) Downside risk to 2.8b lbs Californian Objective Estimate to potentially ~2.65b lbs, based on light supply coming from the South Valley, crop quality issues and elevated heat levels; 2) Liquidity issues among growers, leading to cuts to input purchases (fertiliser, water), with an expectation for grower default rates to pick up early 2025; 3) Crop pull outs exceeding new plantings, including young trees (as opposed to older trees), driven by the impact from SGMA groundwater regulation.

Based on UBS estimates, the ASX share's net profit could rise 70% in FY26, leading to earnings per share (EPS) of 29 cents. That would put the Select Harvests share price at less than 15x FY26's estimated earnings.

The post Buy these 2 undervalued ASX shares in December, says expert 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 SiteMinder. The Motley Fool Australia has positions in and has recommended SiteMinder. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2024