S&P/ASX 200 Index (ASX: XJO) growth shares are a great way to grow your wealth faster than the broader share market in my opinion.
It’s the shares that are increasing their revenue and profit at a fast pace that can compound with solid results. ASX 200 growth shares can be big enough to be able to get through this coronavirus period, whilst being small enough to still have plenty of growth potential.
Here are three ASX 200 growth shares I’d love to buy for my portfolio:
A2 Milk Company Ltd (ASX: A2M)
I think A2 Milk Company is one of the best shares on the ASX. It has good profit margins, a quality group of products and a very large total addressable market.
The fact that it’s expanding in both China and the US is right compelling for future profit growth. The current crisis is not dampening A2 Milk’s growth. Indeed it actually seems to be accelerating growth with some customers stocking up on product. I think it’s attractive that A2 Milk can target an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 30% while still growing so fast.
Another reason why A2 Milk is one of the best ASX 200 growth shares is its large cash balance which means it would have plenty of liquidity to survive even if it wasn’t still earning growing profit.
Xero Limited (ASX: XRO)
I believe Xero is another of the best growth ideas out there. The cloud accounting business has been growing its total subscribers at a fast rate since it first listed on the ASX. Those new subscribers come with a high gross profit margin and pay a pleasing monthly amount to Xero.
The current coronavirus crisis is starting to cause some issues for the ASX 200 growth share. Don’t forget that Xero’s clients are small and medium businesses.
But as long as Xero can keep growing total global subscribers over the longer term then there’s still a lot to like about Xero. It’s now starting to make a net profit and it’s also generating positive free cash flow.
Pro Medicus Ltd (ASX: PME)
Pro Medicus is another of the best on the ASX. It has a global, high-quality client base signed on with multi-year agreements.
The ASX 200 growth share also has no debt with a growing cash balance. There are plenty of growth levers that Pro Medicus can pull. It has a very high earnings before interest and tax (EBIT) margin of 50.2%. With such a high profit margin, a lot of the new revenue just falls straight to the bottom line.
A fast growing dividend is also another bonus.
All three of these ASX 200 growth shares are great businesses worthy of being in any portfolio. The problem is buying them at a good price. I don’t want to overpay for these shares. The prices we saw in March 2020 for Pro Medicus was good enough to buy, but not right now. At the moment I’d probably say A2 Milk is the best buy, particularly as it’s about to expand into Canada.
But there are other top growth shares out there trading at good prices.
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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 Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia owns shares of A2 Milk. 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.