If you’re aiming to beat the market throughout the 2020s, then I think the mid cap space is a great place to look for investment ideas.
Right now, there are a good number of companies at this side of the market which I believe have the potential to grow materially in the coming years and drive strong returns for investors.
Three mid cap shares that I would buy are listed below:
ELMO Software Ltd (ASX: ELO)
The first mid cap share to look at is ELMO Software. It is a human resources and payroll software company which provides a unified cloud-based platform that streamlines processes. Its software has been growing in popularity over the last few years, which has led to very strong recurring revenue growth. Pleasingly, FY 2020 has been no exception, even amidst the pandemic. It expects annualised recurring revenue (ARR) of $55 million to $57 million this year. This represents a year on year increase of 20% to 24%. Another positive is that it has a significant runway for growth in the local market and the opportunity to expand internationally in the future.
EML Payments Ltd (ASX: EML)
Another mid cap share to look at is EML Payments. It is a payments company with a focus on pre-paid cards and digital gift cards. EML provides its services to a wide range of businesses. These include shopping centres, bookmakers, and salary packaging companies. Although its performance is likely to be impacted greatly this year because of the pandemic, I believe it is well-positioned to accelerate its growth again once the crisis passes. Especially given the recent acquisition of UK-based Prepaid Financial Services. This has opened EML up to the emerging field of banking as a service (BaaS).
Nanosonics Ltd (ASX: NAN)
A final mid cap share to consider buying is Nanosonics. As well as being in a strong position for growth thanks to its industry-leading trophon EPR disinfection system for ultrasound probes, the expansion of its product portfolio looks likely to give its sales a huge boost. Nanosonics is planning to launch several new infection control products targeting unmet needs. And given how the first new product has a similar opportunity to the trophon EPR product, it looks set to double its addressable market upon release in FY 2021.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Elmo Software. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited and Nanosonics Limited. The Motley Fool Australia has recommended Elmo Software, Emerchants Limited, and Nanosonics Limited. 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.
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