I have a handful of favourite ASX200 growth shares that I want to buy.
But, it's not often that they trade at very compelling valuations. Recent market declines have led to many quality names trading at the cheapest prices they have done for a number of years.
These are two ASX200 growth shares that I'd like to buy this month:
InvoCare Limited (ASX: IVC)
The InvoCare share price is down 22% over the past year, but the funeral operator is still exposed to the attractive ageing population tailwinds.
Death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050. These are morbid stats, but it speaks of the ultra-long-term opportunity if InvoCare can maintain its large market share and keep increasing funeral prices over time.
It is currently going through a major renovation process at its locations to make them brighter places and create an atmosphere of celebration rather than mourning. Management said the early results are good and believes these upgrades will lead to sustainable earnings per share (EPS) growth of 10% per annum.
The (temporary) decline in the death rate could make now a good time to start buying shares. It's trading at 23x FY19's estimated earnings.
Challenger Ltd (ASX: CGF)
Challenger has just suffered an earnings downgrade to expectations, its share price is down 47% over the past year.
Sentiment has declined about the annuity provider with the government delaying the implementation of new retirement rules for a couple of years.
However, patient investors should still be attracted to the fact that the rules are going to change, there are going to be 40% more retirees over the next decade, the superannuation pool of assets continues to get bigger and assets like shares & property look more risky compared to the safety of an annuity.
Challenger is clearly not risk free, volatile markets can harm short-term earnings if the assets under management (AUM) falls. But, it's my preferred financial pick compared to banks or insurers due to the long-term tailwinds.
It's trading at less than 11x FY20's earnings with a trailing grossed-up dividend yield of 7%. At this level, barring another GFC, I think it looks attractively valued for a long-term buy.
Foolish takeaway
Lower share prices are more attractive if long-term profit growth still looks on track. I believe both of them will comfortably beat the ASX index's returns over the next five or ten years.
