We’re nearly at the end of FY20. I think there are some great ASX shares that would be good buys for growth investors in July.
There is a bit of market uncertainty again with rising COVID-19 numbers in some countries that previously seemed to have things under control.
I’m not sure about investing in some ASX shares that have run hard. Some shares are being priced as though there won’t be any other COVID-19 disruptions. That may be a bit premature in my opinion.
But I think these ASX growth shares could be good buys:
Share 1: Bubs Australia Ltd (ASX: BUB)
Bubs is an Australian based infant formula producer. It specialises in goat products and it has access to the largest goat herd in Australia. I also like that Bubs recently acquired a production facility which is certified to make products for Chinese consumption.
The ASX share is reporting impressive growth. I believe it will keep delivering solid double digit revenue growth for the rest of 2020.
In the FY20 third quarter to 31 March 2020, Bubs delivered revenue of $19.7 million. This was a 67% increase compared to the prior corresponding period, it was also a 36% increase on the previous quarter. It delivered 137% growth of its infant formula revenue. Chinese revenue jumped 104%.
This large increase in revenue, plus keeping control on costs, helped Bubs deliver a positive operating cashflow of $2.3 million. Positive cashflow is an important milestone for small growth shares.
Share 2: Bapcor Ltd (ASX: BAP)
Bapcor is Australia’s leading auto parts business.
Bapcor announced this week that it has seen a large amount of sales growth for two of its main divisions.
Management said its retail segment experienced strong demand in May and June with Autobarn same store sales increasing over 45% from the prior year. On a full year basis to the end of June 2020, Bapcor estimated that Autobarn same store sales will increase by approximately 8%.
Burson Trade has also experienced strong demand in May and June with same store sales growth up approximately 10%. On a full year basis, Burson same store sales growth is expected to be around 5%.
Bapcor’s segments that suffered most heavily due to COVID-19 were New Zealand, specialist wholesale and Thailand. These segments are also recovering according to Bapcor.
Management is now experiencing net profit after tax (before significant items) for FY20 to be in the range of $84 million to $88 million.
I’m excited by the ASX share’s overseas potential because it’s only just getting started there.
The lifting of COVID-19 restrictions should be beneficial to Bapcor in the shorter-term, particularly as more cars go on the road. Also, new car sales are dropping, which should mean more people need parts to make their current car last longer.
Share 3: REA Group Limited (ASX: REA)
REA Group is one of many ASX shares that have faced difficulties due to COVID-19 restrictions. Property listings fell heavily during April, with national listings down 33% according to REA Group. Sydney listings were down 18% and Melbourne listings were down 27%.
Volume is obviously an important factor for REA Group. For the three months to 31 March 2020, REA Group experienced a 20% decline in free cash flow.
However, the ASX share said it has a strong balance sheet with low debt levels and a cash balance of $135 million.
Australia is in a pretty good position with COVID-19, apart from the small outbreak in Melbourne. I think that property listing numbers will continue to rise across the country to a more normal level as the country recovers.
Once jobkeeper ends there could be a number of households that are forced to sell because their income has fallen. This would be a painful time for people, but it may boost REA Group’s revenue.
I think each of these ASX growth shares have very compelling futures in the short-term and over the next five years. At moment I think I’d prefer to go for Bubs because it’s a lot smaller with more growth potential. I’m attracted to the amount of growth it could achieve in Asia.
These 3 stocks could be the next big movers in 2020
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor and BUBS AUST FPO. The Motley Fool Australia has recommended REA Group 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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