Today is the final ASX trading day of the year, so it’s worth looking back on some of the best growth stories of the year. The Australian, American and global share markets all had a good year, but some individual shares managed to do even better. Here are three of my favourites from the year: a2 Milk Company Ltd (Australia) (ASX: A2M) a2 has somehow managed to continue profiting from the baby formula boom ever since the supermarket shelves were first being stripped bare in 2015. During 2017 the share price has risen from $2 to $7.40, an astonishing…
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Today is the final ASX trading day of the year, so it’s worth looking back on some of the best growth stories of the year. The Australian, American and global share markets all had a good year, but some individual shares managed to do even better.
Here are three of my favourites from the year:
a2 Milk Company Ltd (Australia) (ASX: A2M)
a2 has somehow managed to continue profiting from the baby formula boom ever since the supermarket shelves were first being stripped bare in 2015. During 2017 the share price has risen from $2 to $7.40, an astonishing 250% rise.
It’s not as though this performance is derived from speculation, a2 has delivered fantastic results. In FY17 a2 grew its revenue by 56%, gross profit by 75%, earnings before interest, tax, depreciation and amortisation (EBITDA) by 159%, earnings before interest and tax (EBIT) by 167% and net profit after tax (NPAT) by 198%.
I think it goes to show that if a company is able to capture the local and Chinese market effectively then huge growth is possible.
This isn’t the end of growth for a2, at its AGM the company updated the market with results for the four months to October 2017 compared to the prior corresponding period. Revenue was up 68.9%, EBITDA was up 120.8% and NPAT was up 137.7%.
a2 is currently trading at 35x FY18’s estimated earnings.
Altium Limited (ASX: ALU)
The electronic PCB design software provider has been a darling stock for many years now, 2017 produced another wonderful return for shareholders. The share price has risen from $8 to today’s $13.36, a strong rise of 67%.
It can be dangerous to get too excited about market darlings, but Altium continues to deliver. Management are confident of meeting their US$200 million revenue target in a few years. The revenue growth, combined with growing profit margins, should see Altium’s earnings per share grow nicely in 2018 and beyond.
The ‘Internet of Things’ theme should mean that Altium is a big beneficiary as more products and services use Altium’s technology.
Altium is currently trading at 37x FY18’s estimated earnings with an unfranked dividend yield of 1.72%.
Gentrack Group Ltd (ASX: GTK)
Gentrack is one of the foremost software solution providers in the world for energy, water and airport businesses.
The share price has risen from $3.45 to today’s $6.19, a rise of around 79%. I really like Gentrack’s strategy because of how smart it has been making bolt-on acquisitions to its business.
The acquisitions can expand Gentrack’s current offering to all of its clients and also perhaps open up another customer to Gentrack if it wasn’t already providing a service at that airport.
Gentrack is currently trading at 45x FY17’s earnings with a dividend yield of 1.9%.
Sadly, I’m only a shareholder of Altium and missed out on the growth of the other two. Perhaps a2 or Gentrack will fall back and give me an opportunity to buy, but they likely won’t.
It would probably be better for my portfolio if I invested in these growth shares instead.
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Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of A2 Milk and Altium. The Motley Fool Australia has recommended GENTRACK FPO NZ. 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.