To generate the best returns we have to buy growth shares when they're trading at good prices.
It can be quite hard to buy shares when they're valued lower by other investors due to fear. But that's often the best time to buy. The market doesn't always get the price right and it certainly can't predict the future. I can't predict the future either, but I think the below three growth shares could be opportunities:
Webjet Limited (ASX: WEB)
Webjet has quantified the FY20 impact it expects from the Thomas Cook liquidation. Webjet previously indicated it expected to earn $150 million to $200 million in total transaction value (TTV) from Thomas Cook during FY20. Unpaid receivables and lower earnings before interest, tax, depreciation and amortisation (EBITDA) in FY20 isn't good. However, this won't affect every future year.
Plus, Webjet said that WebBeds TTV had grown by over 50% in the first 10 weeks of FY20, excluding the Thomas Cook effect. That's some exciting growth.
FY21 and beyond looks very compelling for Webjet's growth, it's trading at 12x FY21's estimated earnings. Even if it's trading at 15x FY21's estimated earnings I think it looks good value today.
Appen Ltd (ASX: APX)
Appen is one of the members of the ASX tech group 'WAAAX', the fast growing collection tech of mid-caps that is high on many investor wishlists.
The Appen share price has fallen by 30% since the end of July 2019, despite unveiling consistent strong growth in each report. Investors worry about the quality and reliability of Appen's earnings – but Appen is definitely worth considering with exposure to artificial intelligence and machine learning. The Figure Eight acquisition helped diversify earnings away from a few key clients.
Appen is trading at 34x FY20's estimated earnings.
Redbubble Ltd (ASX: RBL)
Redbubble is like the less well-known version of Amazon or eBay which specialises in artist-produced goods and products.
Anything from clothing, stickers, wall art, device cases, home décor and plenty more is sold through Redbubble. It's this type of operational model which can produce compelling network effects – it can attract more buyers and sellers, and a lot of new revenue falls to the bottom line because the 'infrastructure' is already set up.
Redbubble is starting to produce an operating profit, so it could become a lot more profitable from here.
Foolish takeaway
Each of these growth shares could comfortably beat the market over the next few years. If I had to pick one it would be Webjet, I think the price looks too cheap to ignore.
