I believe that ASX growth shares are the best way to grow your portfolio over time. In this article I’m going to share my three best ideas right now.
Share prices follow profit over time and ‘growth’ businesses are growing profit quickly, as the name might suggest.
Here are my three top growth ideas right now:
Webjet Limited (ASX: WEB)
I think that Webjet is the best travel business on the ASX. It has a consumer business that most Aussies know as one of the leading places to find cheap travel deals like flights and hotels. However, the B2C segment isn’t expected to grow much in FY20 with some difficult trading conditions.
But, it’s the B2B corporate travel segment that could send Webjet’s profit flying in FY20 and the next few years. One of the main reasons profit is expected to grow is that management are aiming for an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 50%.
Webjet thinks that FY20 underlying EBITDA will be between $157 million to $167 million, this would be growth of 26% to 34% with organic growth of 16% to 23%. A takeover offer could also come in this year.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay has a very promising future. It’s an electronic donation payment business for not-for profits like churches. It also provides a community app. This app will be materially enhanced by the recent acquisition of Church Community Builder. The economic and offering synergies are very compelling.
The business has just reached profitability and cashflow breakeven level, its gross margins are rising quickly, its revenue is growing faster than expenses and Pushpay continues to grow customer numbers.
Despite the strong performance over the past three months, I think the market is still undervaluing the growth prospects over the next few years as investors realise how profitable Pushpay can be.
A2 Milk Company Ltd (ASX: A2M)
I think A2 Milk is one of the best businesses on the ASX. There are few ASX businesses that have as widely respected products as A2 Milk.
The company has said it will focus more on maintaining its EBITDA profit margin in FY20 and seems to have replaced a lot of its leadership team.
A2 Milk has a huge opportunity in just the US and China alone with a combined population of more than 1.5 billion people. If it can capture a decent market share in each country it will become a much bigger company. Growing scale is good news for A2 Milk’s long-term margins and long-term profit.
Despite expecting profit growth at a similar pace as some of the best ASX tech shares, A2 Milk is trading on a much lower valuation.
I think each of these top growth shares can beat the market over the next year and the next five years. It’s hard to pick a winner because all three of them have very compelling futures.
5 stocks under $5
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended PUSHPAY FPO NZX 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.