The market prices growth companies much higher than slow-moving companies to take into account the company's future growth.
Investors have to ask themselves whether paying high prices today is worth it for the growth shares in question. Here are three expensive growth options with strong prospects:
BWX Ltd (ASX: BWX)
BWX is the natural beauty brand that owns the Sukin range of products. It's experiencing strong growth in export markets like the UK and Canada.
The company has just announced it's going to acquire Mineral Fusion for $38.4 million, it's the number one natural cosmetics brand in the US. This gives BWX a strong opportunity to expand both product lines and grow in the USA too.
BWX is currently trading at 33x FY17's estimated earnings with a grossed-up dividend yield of 1.79%.
Costa Group Holdings Ltd (ASX: CGC)
Costa Group is the fresh food producer that grows berries, mushrooms, citrus fruit, tomatoes and avocados. It also recently acquired Lankester Avocado orchards which will expand its avocado business further.
The storm in Queensland damaged a lot of crops, particularly tomatoes, which is why tomato prices are so high at the moment. This should benefit Costa materially when it discloses its next report.
Costa is currently trading at 63x FY16's earnings with a grossed-up dividend yield of 2.84%.
REA Group Limited (ASX: REA)
REA Group is the owner of realestate.com.au and has large stakes in other property website businesses.
It recently announced that it would be investing in a mortgage broker and growing its strategic partnership with National Australia Bank Ltd (ASX: NAB).
REA Group is currently trading at 35x FY17's estimated earnings with a grossed-up dividend yield of 1.93%.
Foolish takeaway
All three of these businesses have bright futures ahead. I wish I had invested in each of them when a cheaper opportunity had presented itself in the past.
At the current prices, I think BWX could make the best long-term buy because the synergy it creates with its new acquisition could be significant. However, I'll be waiting on the side-lines and hoping that the price comes down for a cheaper entry.
