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