2 ASX 200 shares to buy for growth

This article is about 2 S&P/ASX 200 Index (ASX:XJO) shares that could be working buying for growth, including Bapcor Ltd (ASX:BAP).

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The two S&P/ASX 200 Index (ASX: XJO) shares in this article could be worth considering for the growth that they are generating right now.

Here they are:

Bapcor Ltd (ASX: BAP)

Bapcor describes itself as the leading Australasian business for auto parts. It has various divisions including trade businesses (including Burson Auto parts), retail (including Autobarn), specialist wholesale (including AAD and Commercial Truck Parts Group) and services (including Midas and ABS).

The company has national networks across Australia and New Zealand. It also has a growing network of locations in Thailand.

The ASX 200 share is delivering higher levels of growth during these strange times.

FY20 saw Bapcor deliver 12.8% growth of revenue to $1.46 billion. FY21 has seen growth driven higher.

In the first five months of FY21 to the end of November 2020, revenue grew by 26% with net profit after tax (NPAT) achieving operating leverage from lower expenses in areas such as travel and other areas of discretionary expenditure.

For the first half of FY21, Bapcor is expecting to achieve revenue growth of at least 25% over the prior corresponding period and net profit after tax (NPAT) growth of at least 50% compared to the first half of FY20.

Bapcor’s CEO said that he was very pleased with the performance. Some of the changes implemented has helped the retail performance where revenue went up 40%, such as the recently launched new Autobarn store format and improvements in the online capabilities.

One thing that Bapcor is looking forward to is the completion of its Victorian distribution centre, which is expected this month. The automated picking system will be operational in the next six months. Bapcor said that this development should lead to “significant operational benefits.”

A few months ago Bapcor said that the automotive aftermarket is a resilient industry and historically has performed strongly in difficult economic circumstances. The CEO said that recent trading is another example of its resilience assisted by the increase in sales of second hand cars, reduction in use of public and shared transport modes as well as government stimulus. The ASX 200 share also said that it expects increased domestic tourism and increased use of vehicles will continue to drive the Bapcor businesses.

According to Commsec, the Bapcor share price is trading at 20x FY23’s estimated earnings.

Xero Limited (ASX: XRO)

Xero is another ASX 200 share that is delivering a high level of growth, including through the last year of difficult conditions.

This companies is a cloud accounting business for small and medium businesses. Business owners and their accountants and advisors can access the Xero system anytime, anywhere.

In November the software business reported its FY21 half-year result to 30 September 2020. It said that its operating revenue went up 21% to NZ$410 million with its subscriber numbers rising by 19% to 2.45 million.

Xero reported that its annualised monthly recurring revenue rose by 15% to NZ$877.5 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 86% to NZ$120.7 million. Net profit after tax (NPAT) rose by around NZ$33 million to NZ$34.5 million and free cash flow jumped by NZ$49.4 million to NZ$54.3 million.

One of the areas that Xero excels is the gross profit margin, it was 85.7% at 30 September 2020, which was an increase from 85.2% in the prior year.

Xero said that it’s a long-term oriented business with ambitions for high-growth. It continues to operate with disciplined cost management and targeted allocation of capital. Xero said this allows it to remain agile so we can continue to innovate, invest in new products and customer growth, and respond to opportunities and changes in the operating environment.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia owns shares of Xero. 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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