3 contrarian growth share picks

I’m always on the lookout for growth shares that are trading at attractive prices. It’s much better to buy shares when they’re good value compared to all-time high prices.

It’s important to only buy shares of businesses that are still growing in the long-term. You shouldn’t buy a share just because it’s gone down. Its revenue should still be going up and have plans for continued profit growth, otherwise you might be trying to catch a falling knife.

With that in mind, here are three contrarian picks that could turnaround:

Greencross Limited (ASX: GXL)

The leading Australian pet business recently gave the market a trading update to say that total sales had grown by 9% and like for like sales growth was 4.5%. For me, this sounds like an impressive performance for a business that’s supposedly in trouble.

However, it was new CEO’s write-offs and impairments that have made the market worried. It seems Greencross has now dealt with all possible previous accounting issues and it’s now starting with a clean slate. Which could make Greencross a turnaround story considering the growth of the pet industry and its own expansion plans.

It’s currently trading at 12x FY19’s estimated earnings.

MNF Group Ltd (ASX: MNF)

MNF is a leading Voice over Internet Protocol (VoIP) provider that is growing in Australia and overseas. It has continued to win large contracts from organisations like state governments, as well as working with Skype and Uber.

Its plan to revitalise the Pennytel telecommunications brand, which is aimed at over-50s, has spooked investors, which is why the share price has dropped around 30% since the start of February. However, I think this is a good chance to buy into a growing business at a discounted price.

It’s currently trading at 27x FY18’s estimated earnings, which isn’t bad for a company growing earnings per share (EPS) at mid-teen digits.

InvoCare Limited (ASX: IVC)

The leading Australian funeral provider’s share price is down around 25% from the end of November last year.

There seem to be three main causes for this decline. A similar UK funeral company had to reduce its prices due to competition. The death rate is lower than expected. InvoCare is investing in refurbishing its locations for future growth.

I don’t think any of those are long-term issues for InvoCare. Firstly, it doesn’t operate in the UK and there are no large non-profit operators here. Second, the death rate will very likely return to its expected long-term growth average. Third, investing in the short-term is good for the long-term. I believe InvoCare will get back to growth in FY19 and beyond.

It’s currently trading at 23x FY19’s estimated earnings.

Foolish takeaway

I believe all three shares have a good chance of delivering market-beating returns over the next five years. At the current prices I’m personally drawn to InvoCare because of its defensive earnings and rock-solid history. However, Greencross and particularly MNF also have good growth plans.

Other shares with exciting growth prospects are these top stocks, including two that are expanding in Asia.

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Motley Fool contributor Tristan Harrison owns shares of Greencross Limited and InvoCare Limited. The Motley Fool Australia owns shares of and has recommended Greencross Limited and MNF Group 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 Scott Phillips.

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