With many ASX growth shares soaring to the moon during reporting season, here are my top three stocks to buy on a pullback.
Appen Ltd (ASX: APX)
The Appen Ltd share price had risen almost two-fold since the start of the year. However, the share price fell 9.15% on Tuesday following a capital raising to acquire San Francisco-based Figure Eight Technologies. Figure Eight is a best in class machine learning software platform which uses highly automated annotation tools to transform unstructured text, image, audio and video data into customised high-quality artificial intelligence training data.
Figure Eight’s revenue for FY18 was A$42 million, with a compound annual growth rate (CAGR) of over 50% since FY15.
The capital raising was for A$285 million at an offer price of A$21.50 per new share. Appen closed at $22.14 on Tuesday.
I believe the stock price pulling back near its offer price presents good value for long-term holders. While the Appen share price has jumped 5.17% higher in this afternoon’s trade, it certainly deserves a place on your watchlist to keep an eye out for the price action.
Rhipe Ltd (ASX: RHP)
Rhipe Ltd provides wholesale of subscription software licenses to a growing number of IT service providers in the Asia Pacific region. The stock trades at a PE ratio of 48, arguably an expensive stock, especially considering the Rhipe share price is up almost 40% this year.
However, the theme of this article is to address those high-quality growth stocks that have run up a little too much but nonetheless are great long-term investments.
The company delivered the following results in its recent FY19 half-year results:
- Group revenue and gross profit growth of 30%
- Net profit after tax of $3.0m an increase of 181% pcp
- Earnings per share of 2.2 cents per share, an increase of 181% pcp
I believe the Rhipe group will continue to maintain its competitiveness in the rapidly expanding cloud industry.
Jumbo Interactive Ltd (ASX: JIN)
The Jumbo Interactive share price has been on a tear for the last three years. It’s one of the strongest trending stocks on the ASX and continues to deliver outstanding results.
The company operates within the internet lottery business with operations in Australia and Germany. Jumbo is in an expansion phase, actively pursuing further opportunities in the Americas, Asia and Europe.
In the company’s half-year report for the six months to 31 December 2018, the company delivered:
- Revenue growth of 58% to $30.5 million
- NPAT from continuing operations of $12.7 million, up 140%
- HY dividend of 15.0 cents, up 100%
The company’s next generation software platform “Jumbo Lotto” which is designed to enhance customer engagement, improve performance and improve agility for additional products is paying dividends.
I believe the stock is very difficult to approach given its huge run-up. If the stock pulls back to more long term moving averages or demonstrates a continued period of consolidation, it would make it much easier to make a buying case.
Where to invest $1,000 right now
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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Jumbo Interactive Limited. The Motley Fool Australia owns shares of Appen Ltd. 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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