If you are looking for three higher-risk ASX growth shares to buy today, keep reading.
3 high-risk ASX growth shares to buy today
While there is no such thing as a ‘growth’ share — they are just businesses with bright futures — most investors put shares into two basic buckets:
- Value: These are typically slower growth businesses on which the market hasn’t placed a large emphasis for growth — they usually trade at 10x to 20x their current profits.
- Growth: Shares in these businesses usually trade on higher profit multiples (20x plus) because investors are banking on bigger profits in years to come
As you can imagine there are no hard and fast rules of what is and what is not a growth stock because one year from now any business could have bigger profits and/or the market’s forecasts may have changed.
However, investing in a growth business is generally considered higher-risk because it requires us to take a risk that the market’s expectations for growth underestimate the real growth potential.
3 high-risk ASX growth shares
- Catapult Group International Ltd (ASX: CAT) is a $400 million sports technology business that makes devices to monitor player performance and improve game play. The company’s shares trade at 17 times sales (it is yet to make a profit). However, its market appears large and fragmented.
- Class Ltd (ASX: CL1) is another small-cap technology business. The company specialises in developing software used by self-managed superannuation fund (SMSF) administrators, accountants and financial advisors.
- Bulletproof Ltd (ASX: BPF) is the smallest and arguably the highest-risk investment on this list. Bulletproof develops high-speed encryption devices for fibre networks which are used by government agencies and big business. Sales are lumpy but the company appears to have a good footing in its niche cyber security industry.
‘Growth’ or ‘value’ there is really no difference between the two — it’s typically just an assessment at a point in time.
As for Catapult, Class and Bulletproof, I think each of these businesses could go on to become bigger and brighter companies over time. However, you will have to be patient because each company’s shares appear priced to reflect their growth prospects in the medium term. For that reason, I’d advise investors to approach an investment with caution and wade in slowly if you decide to go ahead and buy shares.
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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @OwenRask.
The Motley Fool Australia owns shares of Class Limited. 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 Bruce Jackson.