If you’re looking for market beating returns over the 2020s, then I think the three ASX growth shares listed below would be worth considering.
Especially after today’s market selloff dragged them down to much lower levels.
I believe that all three are well-placed to grow their earnings at a rapid rate over the coming years. Here’s why I would buy them after the selloff:
ELMO Software Ltd (ASX: ELO)
ELMO provides a unified software platform which allows businesses to streamline a range of processes. It has been growing at a strong rate over the last few years, leading to stellar recurring revenue growth. Pleasingly, this growth continued during the pandemic and is expected to be sustained in FY 2021. Management recently provided annual recurring revenue (ARR) guidance of $65 million to $70 million this year. This represents year on year growth of 18% to 27%. Importantly, this guidance is all organic and doesn’t include the benefits of potential acquisitions. ELMO has upwards of $140 million in cash that can be used for value accretive acquisitions in the future.
Another growth share to consider buying is NEXTDC. I think the data centre operator is perfectly positioned to capitalise on the cloud computing boom. While the pandemic has certainly accelerated the shift to the cloud, it still has a long way to go. Last year research firm Gartner predicted that 80% of all organisations will shift their workloads to third-party data centres by 2025. That compares to an estimated 10% that had already done so in 2019. I believe this bodes well for NEXTDC and expect it to lead to increasing demand for its innovative data centre outsourcing solutions. This should underpin solid earnings growth as the company scales.
A final growth share to consider buying is this cloud-based business and accounting software provider. Xero may have been growing at an explosive rate over the last few years, but I believe it still has a long runway for growth over the next decade. At its recent annual general meeting, the company advised that it estimates that less than 20% of its global English-speaking target market is using cloud-based accounting software currently. This compares to 50% in the ANZ market. Clearly, Xero still has a massive market opportunity to grow into over the coming years. And given the quality of its platform, I expect it to capture a growing slice of this market over the 2020s. This could make the Xero share price a market beater over the long term.
These 3 stocks could be the next big movers in 2020
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In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.
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James Mickleboro owns shares of NEXTDC Limited. 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 Xero. The Motley Fool Australia has recommended Elmo Software. 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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