As reporting season winds down, investors are combing through financial results to uncover hidden gems in the ASX market. Companies that have delivered solid earnings growth at a reasonable valuation are drawing attention, with some smaller players making a compelling case for investment.

One of the latest reports from UBS highlights two stocks that they’ve upgraded to a ‘buy’ rating, based on strong financial performance and growth potential. Let’s dive into these picks and see why they could be worth considering for your portfolio.

Aussie Broadband Ltd (ASX: ABB) – A Rising Challenger in Telecom

Aussie Broadband has been making waves in Australia’s telecommunications industry. Operating under the Aussie Broadband and Symbio brands, the company offers broadband, voice, and managed services to business, enterprise, and government clients, alongside wholesale services for other telcos.

In its FY25 first-half results, Aussie Broadband reported:

• 12.5% growth in on-net broadband connections, reaching 727,951 subscribers.
• Revenue increase of 6.8% to $588.5 million.
• Gross profit growth of 7.5% to $217.6 million.
• EBITDA rise of 8.9% to $65.8 million.
• Dividends: An interim dividend of 1.6 cents per share, plus a special dividend of 2.4 cents per share.

UBS upgraded the stock to a ‘buy,’ citing strong earnings growth at a reasonable price. The broker expects Aussie Broadband’s cash earnings per share (EPS) to rise at a 26% compound annual growth rate (CAGR) over the next three years.

One of the key drivers behind this growth? Market share expansion. Currently, smaller telco brands like Aussie Broadband hold about 20% of the market, but UBS believes this could rise to 35%, representing a $3.1 billion revenue opportunity. Business, enterprise, and government segments are also proving to be significant growth areas.

With a price target of $4.80, UBS sees a potential 20% upside in the next 12 months. At under 18x FY26 estimated earnings, Aussie Broadband could be a compelling opportunity for long-term investors.

Accent Group Ltd (ASX: AX1) – Strong Retailer with Multiple Growth Avenues

Accent Group is a major player in Australia’s footwear retail market, acting as the local distributor for several global brands while also owning a range of successful retail brands.

The company’s FY25 half-year results showed:

• Total sales growth of 4.2% to $845 million.
• Owned sales growth of 4.6%.
• EBIT increase of 11.5% to $80.7 million.
• Dividend payout of 5.5 cents per share.
• Store expansion, with 42 new locations added, bringing the total to 903 stores.

UBS remains optimistic about Accent’s expansion strategy, even as store growth moderates in FY25 before picking up again in FY26. They highlight store refurbishments and an increasing focus on private-label apparel as key drivers of future sales growth.

Additionally, Accent has been making strategic moves to enhance profitability, including the closure of loss-making Glue stores. The company’s growing in-house apparel brands are proving to be profitable, with an emerging private-label offering that UBS finds promising.

UBS has set a price target of $2.45, suggesting a potential 20% gain over the next year. With the stock trading at under 14x FY26 estimated earnings, it presents an attractive valuation for investors looking for exposure to the retail sector.

Looking for More High-Potential ASX Stocks?

Aussie Broadband and Accent Group are just two examples of exciting ASX opportunities, but there are more stocks poised for strong growth in 2025. If you want exclusive access to the top five ASX stocks recommended by experts this month, don’t miss out on our Free Report: Top 5 ASX Stocks to Buy in March 2025.

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