Encouraging US consumer data and jobless claims hitting the lowest were the main factors driving a surge in ASX Stocks. While equity benchmarks inched higher globally, some Fundamental Stocks were outshining.
Two of the stocks for Long Term Holding recommendation are
Wesfarmers Limited (ASX: WES)
Wesfarmers Limited in its half-yearly result for the period ended 31 December 2023 reportedly increased its operating cash flows by 47.0% to $2.9 billion, driven by a 27.1% increase in divisional operating cash flows due to favourable working capital movements and strong earnings growth in the Kmart Group. For the half-year that ended on 31 December 2023, the company recorded a statutory net profit after tax of $1,425 million, a 3.0% increase. The management decided to pay a fully-franked interim dividend of $0.91 per share, an increase of 3.4% over the previous corresponding period, as a result of strong cash flows and profit growth for the half. The majority of the divisions reported safety results, with Wesfarmers' TRIFR rising to 10.9. The market-based emissions under Scope 1 and 2 decreased by 7.8% overall, with the divisions continuing to move closer to their intermediate and long-term goals.
Wesfarmers had earlier announced on 29 November 2023, the execution of the Scheme of Arrangement, whereby 100% of the shares in SILK Laser Australia Limited were acquired by Australian Pharmaceutical Industries Pty Limited ('API,' a wholly-owned subsidiary of Wesfarmers Limited).
Wesfarmers Limited is considered as one of the Best Companies to Invest in as it continues to invest in order to fortify its current businesses and create growth platforms, with a focus on long-term value creation for the shareholders. The company’s retail businesses are well-positioned in the current environment and experienced improvements in consumer sentiment due to their strong value credentials and expanding offer of everyday products. The excellent quality of the Mt. Holland deposit is expected to enable the integrated covalent lithium hydroxide project to operate with an appealing relative cost structure and provide adequate long-term shareholder returns. WesCEF's share of spodumene concentrate production in FY2024 is anticipated to be roughly 50,000 tonnes, as operations are ramping up following the concentrator at Mount Holland's successful commissioning. The estimated net capital expenditure for FY2024 by the company is between $1,000 million and $1,200 million.
Among the Best ASX Stocks, Wesfarmers Limited is able to manage potential risks and opportunities under a variety of economic scenarios because it maintains a significant degree of balance sheet flexibility. The company also understands that sustainability, performance, and long-term shareholder value are complementary. Rapid population growth and low unemployment support Australia's overall economic conditions, driving up demand and requiring the building of additional housing
Temple & Webster Group Limited (ASX: TPW)
Temple & Webster Group Limited (ASX: TPW) released its annual financial results for the fiscal year 2024, concluding on 30 June 2024, on 13 August 2024.
The company reported a record revenue of $497.8 million for FY24, reflecting a 26% increase compared to the previous year, primarily attributed to a 31% rise in active customers, reaching an unprecedented total of 1.1 million. This performance is particularly noteworthy in light of a general decline of approximately 4% in the furniture and homewares market over the same period, which enabled Temple & Webster to enhance its market share by 31% year-on-year.
The gross margin percentage for FY24 rose to 33.4%, up from 32.6% in FY23, despite the challenges posed by inflation and elevated interest rates affecting household finances. The improvement in gross margin was driven by better shipping recovery, a reduction in refunds and replacement costs, and a favourable shift in product mix as consumers redirected their spending towards lower discretionary, higher-margin categories such as bedroom, dining, and living room furniture.
Additionally, all other operating expenses decreased as a percentage of revenue in FY24, attributed to strategic cost-base investments being surpassed by revenue growth and efficiency improvements facilitated by Generative AI.
The EBITDA stood at $13.1 million, aligning with the Group's previously communicated range of 1-3%, at 2.6%, while the profit before tax amounted to $6.4 million.
The asset-light, negative working capital model of TPW generated positive free cash flows of $25.8 million, culminating in a closing cash balance of $116.4 million. The Group continued to maintain a debt-free status.
The company remains committed to its customer-centric strategy, actively enacting various pricing adjustments to meet the needs of clients facing rising cost of living challenges. Remarkably, the company has commenced fiscal year 2025 with robust performance, achieving a 26% year-on-year growth by mid-August 2024 itself, thereby reinforcing its long-term objective of generating $1 billion in annual revenue.
The list of Growth Potential Stocks remains incomplete without Temple & Webster, which exhibits a robust financial growth trajectory, having achieved substantial revenue increases from $176.5 million in 2020 to $502 million in 2024. The company's future scalability initiatives further enhance the potential for capital appreciation and an increase in shareholder value.
Source: Company’s Report
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