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2 ASX shares I’d buy in a heartbeat

There are a few ASX shares that I’d buy in a heartbeat if I were investing today.

One of the great things about the share market is that share prices are constantly changing. We always get opportunities to buy different businesses at different prices.

It’s going to be an interesting next few months. On the positive side for the share market it seems like a vaccine is getting closer and closer. However, I think the US election could throw up a lot of volatility, depending on how it goes down.

These are two ASX shares that I’d buy in a heartbeat if it were up to me:

Pushpay Holdings Ltd (ASX: PPH)

I think Pushpay could be one of the ASX shares most likely to do well over the next year and five years. Its current revenue base is quite defensive. It facilitates digital giving to clients like large and medium US churches. People are generous with their donations to their church, so I don’t think that’s going to see a heavy decline even with the US going through a COVID-19 recession.

It’s the potential growth that gets me particularly excited by Pushpay. In FY20 it added US$31.4 million of revenue, representing 32% growth of US$129.8 million. The company has a long-term goal of US$1 billion from the US large and medium church sector.

That US$31.4 million increase of revenue saw the gross profit margin increase from 60% to 65% in one year. I don’t know what Pushpay’s gross margin will be when it achieves US$200 million of revenue, but it seems like it could be materially higher than FY20.

It’s this scalability of ASX tech shares that makes them among the best businesses to own for their growth journey in my opinion.

In FY21 Pushpay is aiming to double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to at least US$50 million. The company may be able to comfortably beat that goal as it beat its guidance in FY20.

At the current Pushpay share price it’s trading at under 35x FY21’s estimated earnings.

A2 Milk Company Ltd (ASX: A2M)

I think A2 Milk is one of the best ASX growth shares that Aussies (and Kiwis) can buy.

Over the past month the market has sent the A2 Milk share price down by about 15%. That’s despite the company expecting more strong revenue growth in FY21 with an attractive EBITDA margin of at least 30%.

For a business like A2 Milk, I think the market is underestimating how much compound growth the business can still generate over the coming decade. In FY20 alone it grew revenue by 32.8% to NZ$1.73 billion and earnings per share (EPS) rose 33.5% to NZ 52.39 cents.

That result was delivered after many years of strong growth. In FY20 the business saw Chinese label infant formula revenue rise by 101% to NZ$337.7 million. I believe there’s a lot more growth that can come from China over the next few years.

The US is looking like a great market too for the ASX share. USA milk revenue increased by 91.2% and the distribution expanded to 20,300 stores across the country. Few ASX shares have that level of exposure to the two biggest economies in the world.

Plenty of other countries offer a longer-term growth runway for A2 Milk like Canada and then potentially Europe.

A2 Milk had a strong balance sheet at 30 June 2020 with a cash balance of NZ$854.2 million. That large cash pile can be used to expand A2 Milk’s manufacturing capabilities and may also lea dto distributions of profit to shareholders.

At the current A2 Milk share price it’s valued at 30x FY21’s estimated earnings.

Foolish takeaway

I think the valuations of both ASX shares look very reasonable to me when considering how much they could grow over the next three to five years. At the current prices I think Pushpay seems like a really good idea, particularly when you consider the potential to expand into other markets in the long-term. But A2 Milk could also be a strong buy today. 

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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 PUSHPAY FPO NZX. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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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