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Should you buy these beaten down ASX shares?

James Mickleboro
Beaten down ASX shares

The Australian share market may be trading at a record high, but not all shares have fared as well.

The two shares listed below have all fallen heavily over the last 12 months. Is this a buying opportunity?

Costa Group Holdings Ltd  (ASX: CGC)

The Costa Group share price has lost 47% of its value over the last 12 months. Investors have been selling the horticulture company’s shares due to a series of disappointing earnings downgrades and a massive $187 million capital raising in 2019. The former was caused by issues outside the control of management, including weak demand and production issues.

Looking to FY 2020, management has provided net profit after tax guidance of $56.6 million. This means its shares are changing hands at under 18x estimated FY 2020 earnings. I think this is good value if you are confident it will achieve its guidance. However, given its multiple downgrades last year, I’m going to hold off an investment for the time being and see how it performs over the coming months.

St Barbara Ltd (ASX: SBM)

The St Barbara share price is down 41.5% since this time last year. The gold miner’s shares have come under pressure due to production issues at its Gwalia operation. Not only did this lead to a downgrade to its production guidance, the lower production led to an increase in costs.

I think this could be a buying opportunity for investors that are looking for exposure to gold. After all, the production issues at Gwalia are only temporary and FY 2020 should be much stronger. Especially given the company’s $768 million acquisition of the very promising Atlantic Gold business. The Canada-based operation is forecast to add between 95,000 and 105,000 ounces of gold to St Barbara’s production at an AISC of between A$900 and A$955 per ounce in FY 2020. 

The post Should you buy these beaten down ASX shares? appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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. 2020