When it comes to investing, it pays well to have one eye on the road ahead. ASX growth companies such as CSL Limited (ASX: CSL) Altium Limited (ASX: ALU) and The A2 Milk Company Ltd (ASX: A2M) have provided astronomical returns to investors over the last few years (especially if you were lucky enough to get them early). Growth investors typically look to future earnings in order to find suitable investments.
Here are two ASX companies I believe will do well in any growth orientated portfolio.
Afterpay Touch Group Ltd (ASX: APT)
Whenever a company becomes a verb, it is almost always a good sign for its future prospects (just think 'googling'). This is exactly what Afterpay Touch Ltd has achieved, with a generation of young Australians "Afterpaying" everything from clothes to fridges to even going to the dentist. Afterpay achieved eyewatering growth over the last 3 years in particular, and investors have jumped into this home-grown success story in droves.
I like Afterpay's business model, as it is the retailers which make up the bulk of Afterpay's revenue, rather than the consumer. This means that, unlike credit cards, consumers will not be hit with debilitating interest if they don't make their repayments on time, only fixed late fees.
This concept has taken the Australian retail industry by storm and has been expanding into the lucrative US market. Progress has been extremely positive, with the US customer base growing around 40% in the 8 weeks following Christmas/New Years, which is an incredible statistic.
If Afterpay can even come close to payment giants Mastercard and Visa in the payments industry, it will become one of the biggest companies on the ASX. For these reasons, I believe Afterpay Touch is an essential part of any growth portfolio.
REA Group Limited (ASX: REA)
REA Group has substantially outperformed the ASX 200 for the last few years and it's easy to see why – this company has seen phenomenal growth numbers with its property market advertising platform. Its flagship realestate.com.au site is the most popular real estate website in Australia by a wide margin, with almost 75 million monthly users.
REA's primary revenue source comes from property listings on its websites, for which the sellers or renters are charged a fee – the buyer/tenant pays nothing. The company has used this business model to increase its revenue stream substantially and consistently each year over the past five years, with a 20.3% increase from 2017 to 2018 (its latest reported year). As the online economy continues to grow, REA is in prime position to continue to take advantage of this trend.
This, in turn, has allowed REA Group to increase its dividend every year since 2009, which is currently yielding 1.67% grossed-up. As REA continues to increase cash flow, this dividend will only go up over time, making REA a fantastic growth stock for the future.
Foolish takeaway
I believe these Afterpay Touch Group and REA Group would both be a solid foundation for any growth-orientated investor. Regular investments and taking advantage of market dips with a dollar-cost averaging strategy would be a prudent way to build a strong growth portfolio over time.
