I think there are some ASX growth shares that would be better buys than owning Afterpay Touch Group Ltd (ASX: APT), such as Bapcor Ltd (ASX: BAP).
Bapcor is the largest auto parts business in Australia and New Zealand with its nationwide chains of Autobarns and Burson.
Here are some reasons why I think Bapcor is a better growth pick compared to Afterpay:
Defensive earnings
Most of Afterpay's underlying sales are related to discretionary spending, like fashion retailing, which could falter in Australia goes through a downturn. An economic dip would also likely lead to a higher rate of consumers missing repayments to Afterpay.
Whereas Bapcor's main source of earnings is Burson, which supplies parts to mechanics. Car servicing and repairs continue all through economic cycles. Indeed, people are likely to want their cars to last longer in a downturn rather than buy a new one so demand for Bapcor's products could actually increase.
International growth
One of the main reasons that investors are attracted to Afterpay is its international growth plans in the US and UK. Over the long-term these plans may be worthwhile but at the start Afterpay has to run up some losses to get traction.
Bapcor has its own international growth plans too. It is opening Bursons in Thailand, where there's a much larger human and car population than Australia. Bapcor has called this division 'Asia', not just 'Thailand', which suggests this segment could grow to other Asian countries. This could be a long-term growth tailwind
Profitable
In FY18 Afterpay reported a multi-million dollar loss, whereas Bapcor reported an underlying profit of just over $86 million.
It's much easier to appreciate a business when it's been profitable for a number of years and is paying out a growing dividend. Being profitable means you don't have to worry (as much) about burning through cash nor needing to capital raise.
Valuation
Afterpay does plan on making a profit in the future, I'm not suggesting it's not a buy at all. But if all goes well and it hits analyst estimates for profit in a couple of years, it's still trading at more than 100x FY20's earnings.
Bapcor generated continuing earnings per share (EPS) of around 31 cents in FY18, which means it's trading at under 20x FY18's earnings and management have predicted further profit growth this year.
Foolish takeaway
Afterpay may be an excellent business to own over the next decade, but over the next two years I think Bapcor could be the better one to own due to its attractive valuation and growth prospects.
