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Analysts pick top ASX stocks for the quarter

Recently, analysts from global capital group Canaccord Genuity released their quarterly Australian Focus List. The focus list is comprised of 9 stocks from a diverse range of sectors that analysts believe offer solid growth prospects. 

Here I have selected 4 companies that show excellent potential for growth in the next quarter.

Kathmandu Holdings Limited (ASX: KMD)

Kathmandu Holdings is a retailer and wholesaler of clothing, footwear and equipment targeted at the travel and adventure sector. Although the retail sector is facing multiple headwinds, analysts have added Kathmandu to the list following the company’s $350 million acquisition of the Rip Curl brand.

The Rip Curl acquisition is forecast to reduce the seasonality in earnings for Kathmandu, contributing at least 10% to earnings per share, and increasing the company’s offshore exposure and sales. According to analysts, Kathmandu is positioning itself to be a home of iconic brands. Successful execution of this strategy and improving trading conditions could see further acquisitions.

Redbubble Ltd (ASX: RBL)

Redbubble is an online marketplace that allows independent artists to connect with customers and fulfil orders through print on demand technology. Historically, the Redbubble share price has been extremely volatile and is correlated with the company’s revenue growth profile.

Redbubble has been added to the list as analysts believe that the company has gone through a revenue trough in 1Q20 and investor sentiment is forecast to improve in FY20. Analysts cited the company’s launch of 5 new products and the acquisition of TeePublic as key drivers of incremental revenue growth in FY20. A weaker Australian dollar and expanding gross margins are also predicted to improve Redbubble’s future earnings performance.

Healthia Ltd (ASX: HLA)

Healthia is an operator of podiatry and physiotherapy clinics across Australia. Since listing in September 2018, the company has expanded its clinic portfolio from 104 allied health clinics to 133. Analysts from Canaccord cite the highly fragmented health services industry and increasing demand for allied health as key drivers of growth for the company.

Earlier this year, Healthia outperformed its prospectus when the company reported earnings for FY19. The company saw revenues of $76.6 million versus its prospectus of $71.8 million and an underlying earnings before interest, tax, depreciation and amortisation of $11.7 million against a prospectus of $10.3 million. Analysts forecast accelerated acquisition growth and expanding vertical integration capabilities as key drivers of growth for Healthia.

MNF Group Limited (ASX: MNF)

Analysts predict that the MNF Group could benefit from large structural changes in the telco sector. Changes in the sector include the progression to internet-based communication services, rollout of the NBN, and the rise of unified communication as a service (UCaaS).

MNF specialises in the provision of voice data, cloud-based communication and communication enablement services. Changes in the sector are expected to improve the growth profile of MNF by improving the company’s gross margins and earnings leverage.  

Foolish takeaway

In my opinion, the stocks listed by analysts show great potential for growth in the quarter and beyond. Although analyst recommendations reflect institutional sentiment, I think it is important for investors to do more research and let price action dictate before making and investment decision.  

Other companies added to Cannacord’s Australian Focus List include Oz Minerals Limited (ASX: OZL), Primero Group Ltd (ASX: PGX), Resolute Mining Limited (ASX: RSG), Galilee Energy Ltd. (ASX: GLL) and CML Group Ltd (ASX: CGR).

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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia has recommended REDBUBBLE FPO. 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.