There are some S&P/ASX 200 Index (ASX: XJO) growth shares that could be worth watching for growth over the coming years.
Here are two businesses which have a long-term history of growth:
Altium Limited (ASX: ALU)
Altium is one of the world’s leading electronic PCB software businesses. It has various software segments like Altium Designer, Octopart and Nexus which service the needs of different software engineers.
Over the past five years the Altium share price has risen by 500%.
The ASX 200 growth share has a large, blue chip client base. Some of its clients include: NASA, Space X, Boeing, Lockheed Martin, Tesla, Toyota, Google, Bosch, Proctor & Gamble, CSIRO, the University of Melbourne, ABB, Siemens, Honeywell, Qualcomm, Broadcom, Texas Instruments, Disney, Apple and Amazon.
Altium 365 is the product from the business to pivot towards the cloud. The company says that the total global electronic manufacturing and supply chain is estimated to be over $2 trillion. The cloud move should help significantly increase the total addressable market according to management.
One of the ways that Altium is planning to grow using Altium 365 is with Altimade, a new premium service which is about ‘smart manufacturing’.
Over the long-term, the ASX 200 growth share is aiming for US$500 million of revenue and 100,000 Altium Designer subscribers, perhaps by 2026.
However, in the short-term the company is suffering from COVID-19 effects. In the FY21 half-year, Altium expects to report that total revenue fell 3% to US$89.6 million. This was led by a 10% drop in revenue in the Americas.
Nexus recorded a decline of 14% for the half because of the timing of deals – there’s a significant pipeline in the second half.
The final main negative point was that China revenue underperformed with a decline of 15% in revenue for the half as licence compliance activities became more difficult at the low end of the market because of uncertain economic conditions in China.
On the positive side of things, board and systems revenue has been improving – revenue was down 11% in the first quarter but flat in the second quarter, despite the reorganising to the cloud pivot. Also, Octopart saw revenue growth of 19% for the half, which is a positive leading indicator for PCB design growth that should drive Altium Designer sales in the second half according to management.
According to Commsec, the Altium share price is valued at 42x FY23’s estimated earnings.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is one of the oldest businesses on the ASX, it was listed in 1903. Since then it has evolved into a large investment conglomerate.
Over the past five years the Soul Patts share price has risen by 65%.
The biggest part of Soul Patts’ performance comes from the returns of its underlying holdings. The biggest positions in the portfolio are names like Brickworks Limited (ASX: BKW), TPG Telecom Ltd (ASX: TPG) and New Hope Corporation Limited (ASX: NHC).
Soul Patts hopes that some of its smaller investments can grow to become more larger companies within the portfolio. Clover Corporation Limited (ASX: CLV) and Palla Pharma Ltd (ASX: PAL) are two of the smaller names that Soul Patts has a large position in.
Not only can Soul Patts grow from its existing investments, but it’s regularly making new investments too with the excess cashflow from its dividend income (less expenses). Some agriculture assets were among the latest investments that Soul Patts made. It also tried to acquire Regis Healthcare Ltd (ASX: REG) at the end of last year, though that was knocked back.
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Tristan Harrison owns shares of Altium and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.