If you’re looking for strong returns over the 2020s, then I think the three ASX growth shares listed below could be worth considering.
I believe all three ASX shares are well-placed to grow their earnings strongly over the long term. This could lead to their shares being market-beaters in the 2020s. Here’s why I like them:
ELMO Software Ltd (ASX: ELO)
ELMO is a cloud-based human resources and payroll software company. It provides businesses with a unified platform to streamline a range of processes. Demand for its offering has been growing strongly in recent years, even during the pandemic. This led to ELMO delivering impressive annualised recurring revenue (ARR) growth in FY 2020.
Pleasingly, more strong organic growth is expected in FY 2021. This should be bolstered by the major new acquisition of UK-based Breathe for an initial payment of 18 million pounds (A$32.4 million). Breathe is a fast-growing, scalable human resources platform for small businesses. Its annualised recurring revenue (ARR) as of 31 August 2020 stood at 3.6 million pounds (A$6.5 million) and has been growing at over 30% annually. Considering its sizeable cash balance, I suspect there could be further acquisitions in the pipeline.
Nearmap Ltd (ASX: NEA)
Another ASX growth share I would buy is Nearmap. It is a leading aerial imagery technology and location data company which gives businesses instant access to high resolution aerial imagery, city-scale 3D datasets, and integrated geospatial tools. The beauty of its platform is that users can undertake site visits from the comfort of their home or workplace. Not only does this offer significant time and cost savings for users, it is also very helpful during this age of social distancing and remote working.
Looking ahead, management appears confident that its growth will accelerate thanks to its recent capital raising and new growth initiatives. It is targeting annualised contract value (ACV) growth of 20% to 40% per annum over the long term, with underlying churn of less than 10%. Thanks to the quality of its offering, particularly its latest AI product, I believe it is well-placed to achieve this.
NEXTDC Ltd (ASX: NXT)
A final ASX growth share to consider buying is NEXTDC. It is an innovative data centre operator which owns a collection of world class centres in key locations across Australia. Over the last few years NEXTDC has experienced very strong demand for capacity in its centres. So much so, this year the company brought forward capacity additions in response to customer demand.
The good news is that the shift to cloud is still only just getting started. I expect this to lead to a sustained increase in demand for its services over the next decade. I’m confident this will underpin very strong earnings growth over the long term. In addition to this, I suspect NEXTDC could look to accelerate its growth by expanding into the Asia market in the coming years.
Where to invest $1,000 right now
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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 Nearmap Ltd. The Motley Fool Australia has recommended Elmo Software and Nearmap Ltd. 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.