I’m always on the lookout for ASX growth shares at good prices that have useful tailwinds.
In this era of low inflation, ultra-low interest rates and rapid technological change, it’s important to find businesses that can keep growing regardless of what’s going on in other areas of the economy.
That’s why I’m attracted to these three ASX growth shares:
InvoCare Limited (ASX: IVC)
InvoCare is Australia’s largest funeral operator and its share price has fallen 17% since the July 2019 high.
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. As morbid as that is, it’s undeniable that the ageing Australian population is a strong tailwind.
I think InvoCare is doing everything right to grow profit – it’s investing heavily in renovating its existing locations, it acquired plenty of regional funeral operators when the funeral market was down and it’s expanding its retail footprint to reach more families in city locations.
I like the potential move into pet crematorium as well, which could be a good diversification strategy.
It’s valued at 26x FY20’s estimated earnings.
Appen Ltd (ASX: APX)
Appen is one of the world leaders in the development of high-quality, human-annotated training data for machine learning and artificial intelligence. Its job is to help technology become even smarter.
The acquisition of Figure Eight improved Appen’s offering to customers and diversified its earnings base. And revenue & profit continue to grow strongly, with shareholders being rewarded by a growing dividend.
Technology is only going to keep getting more advanced from here and it will be businesses like Appen that help it to progress.
Appen’s share price has fallen by 30% since the end of July, so I think it looks comparatively cheap at 35x FY21’s estimated earnings.
Webjet Limited (ASX: WEB)
Webjet is one of Australia’s leading travel businesses. You could say it’s now one of the world’s leading travel businesses because of the DOTW acquisition, making Webjet’s WebBeds one of the world’s leading B2B players.
Despite the strong FY19 report, the pleasing organic growth, the rising profit margin and new products & service launches, the Webjet share price is down 30% since the end of April.
Global travel grows in number every year, that’s why Webjet is investing in initiatives like a religious travel offering as a way to capture more passenger earnings.
If Webjet management can hit their earnings before interest, tax, depreciation and amortisation (EBITDA) margin target of 50% in the medium-term then Webjet could be much more profitable and generate substantially higher profit than today.
It’s currently trading at 13x FY21’s estimated earnings.
Webjet certainly looks like the best value and could create the best returns over the next three or so years. However, if you’re looking for very defensive earnings & dividends with ultra-long-term growth then InvoCare may be the better bet.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor Tristan Harrison owns shares of InvoCare Limited. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended InvoCare Limited and Webjet 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.