2 quality ASX growth shares to buy for 2021

Here's why Xero Limited (ASX:XRO) and this ASX growth share could be top options for growth investors in 2021…

Luckily for growth investors, the Australian share market is home to a large number of companies that have been tipped to grow strongly in 2021 and beyond.

Two that you might want to get better acquainted with are listed below. Here's what you need to know about them:

Surge in ASX share price represented by happy woman pointing to her big smile

Image source: Getty Images

ELMO Software Ltd (ASX: ELO)

The first growth share to look at is ELMO. It is a cloud-based human resources and payroll software company. It provides businesses in Australia and the UK with a unified platform to streamline processes such as employee administration, recruitment, and payroll.

ELMO has been a positive performer during the pandemic and looks well-placed to continue this trend in 2021 and over the next decade. This is thanks to strong demand for its platform and management's plan to make earnings accretive acquisitions.

Morgan Stanley is a fan of the company and believes it is well-placed for growth. As a result, it has put an overweight rating and $9.30 price target on its shares. This compares to the current ELMO share price of $6.45.

The broker was pleased to see ELMO recently reiterate its organic growth guidance and sees positives in its recent $32 million acquisition of UK-based Breathe. These positives include market expansion and cross selling opportunities.

Xero Limited (ASX: XRO)

Xero is a leading cloud-based business and accounting software provider. Thanks to its evolution into a full service small business solution over the last few years, the company has been growing its customer numbers and recurring revenues at a rapid rate.

At the end of the first half of FY 2021, Xero delivered a 21% increase in operating revenue to NZ$409.8 million. It also reported a 19% lift in subscriber numbers to 2.45 million. The latter was driven by growth across all markets.

Since then, the company has raised US$700 million via a notes offering to support its growth. There is speculation that this could involve a major acquisition in the near future. Especially given how Xero has a track record of making bolt-on acquisitions that strengthen its offering. One of these was the acquisition of cloud-based lending platform Waddle for $80 million in August.

One broker that is particularly positive on Xero's future is Goldman Sachs. It recently put a buy rating and $157.00 price target on its shares. Goldman Sachs believes Xero can grow its subscribers to 7.4 million by 2030 and generate NZ$3.4 billion in annual revenue from them.

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 Xero. The Motley Fool Australia has recommended Elmo Software. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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