Home / ASX / Two ASX shares with big turnaround potential

ASX shares that have had a rough time could be investment opportunities.

There’s normally a good reason why a business has fallen in price. But sometimes those issues are only temporary and occasionally the market over-reacts to them.

When those overly negative reactions occur, they could be times to consider some of those ASX shares, like these two:

Bapcor Ltd (ASX: BAP)

Bapcor is a leading car and truck parts business. It operates brands like Burson, Autobarn, Midas and Truckline.

There was recently some sort of falling out between the Bapcor CEO and the board. The fallout was so bad that the CEO Darryl Abotomey and the board parted ways before a new CEO could be found. The acting CEO will be chief financial officer Noel Meehan.

The Bapcor share price has fallen by 18% since 22 November 2021. Mr Abotomey was in charge of the business during a successful period of expansion and diversification of the operations.

The ASX share has gone into truck parts and taken Burson to Thailand in recent years under his leadership. I think the purchase of a 25% stake of Tye Soon – a South East Asian auto parts business – was a very smart move to quickly expand its exposure to the region.

I think that Bapcor has plenty of earnings growth potential over the next few years. The question is how electric vehicles will change things in the longer-term.

However, the Bapcor plans of growing its store network to around 1500 outlets, increasing profit margins and expanding in Asia should mean bottom line growth for the foreseeable future.

Despite the departure of the CEO, Bapcor should have a good future for the next few years and looks pretty cheap at 18 times 2022 estimated earnings, according to CommSec.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is a funds management company that manages more than $115 billion of funds under management (FUM).

The Magellan share price has plunged 46% since 2 July 2021. Trying to buy an ASX share that is dropping like this can be like trying to catch a falling knife.

There is certainly the negative of fund underperformance from some of Magellan’s funds with the decisions to invest very defensively, and also picking Chinese stocks, contributing to underwhelming returns.

However, FUM continues to rise for the ASX share – or at least not fall – which means underlying earnings remain solid.

There are plenty of earnings growth avenues for the fund manager such as Australian shares, FuturePay, sustainable investing, cheaper ETFs and Magellan Capital Partners.

I think the investment in Guzman y Gomez has very strong growth potential over the long-term because the business can roll out its outlets in Australia, the US and other regions.

Whilst sentiment and the short-term looks choppy, Magellan is expected by CommSec to pay a partially franked dividend of $2.23 in FY22, which is a partially franked dividend yield of 7.3%.

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