The best way to beat the market over the long-term is to find businesses that are undervalued and that have attractive long-term growth prospects.
Shares like WiseTech Global Ltd (ASX: WTC) and Pro Medicus Ltd (ASX: PME) have very promising futures, but they have the valuation to match (or more). We need to find those shares that investors haven't gotten too excited about yet:
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is an electronic payments donation business, it facilitates giving by people to organisations such as churches.
The company has been steadily building its client base of medium and large churches, which are great sources of regular donations. Each new church win is an attractive source of earnings for Pushpay. The donation business has recently acquired Church Community Builder which will improve Pushpay's overall offering to church clients.
Pushpay has recently reached profitability and cashflow breakeven. Its revenue and gross profit margins are rising quickly, but expenses aren't expected to grow as much. Net profit could jump fast over the next few years.
BWX Ltd (ASX: BWX)
BWX is the owner of some of the leading natural beauty brands in Australia and the US. Those brands are Sukin, Andalou Naturals, Uspa, Mineral Fusion and Nourished Life.
Sukin is the most important part of BWX's business, it ticks plenty of boxes that consumers who want natural beauty products would want: Australian made, natural ingredients, cruelty free, vegan products, recyclable packaging, carbon neutral and non-GMO.
The company now seems to be turning around after the failed takeover. Several of BWX's brands have good international growth prospects, which should lead to attractive earnings growth for the company in the coming years.
Japara Healthcare Ltd (ASX: JHC)
Japara is one of the largest aged care operators in the country. The ageing population tailwinds are large and should blow for a few decades, which should be a long-term boost for the company.
Tough funding conditions recently have sent Japara's earnings lower, but this isn't going to be the case forever. Funding per resident is expected to slowly rise again whilst Japara has a pipeline of around 1,000 net beds to come online in the next couple of years.
This could be a turning point for Japara after the aged care royal commission, it could mean that Japara can acquire smaller operators who are (or will be) unprofitable in the new operating environment.
Foolish takeaway
All three of these shares could comfortably beat the ASX over the 2020s. Japara and BWX may be good value today, but I think I'm most drawn to Pushpay – its profit is definitely going in the right direction at a quick rate.
