Motley Fool Australia

2 ASX growth shares that could generate huge returns for investors

zig zaggy green arrow with an american note in the background
Image source: Getty Images

Are you looking for growth shares to buy?

If you are, then you might want to look at the two top growth shares listed below. Here’s why they are highly rated:

Appen Ltd (ASX: APX)

This artificial intelligence (AI) data services company could be a ASX growth share to buy right now. Especially given the recent weakness in the Appen share price, which has left it trading 61% lower than its 52-week high.

This weakness has been driven by a disappointing performance in FY 2020 because of the pandemic. A number of tech giants that Appen counts as customers have put off major AI projects during COVID-19. This has led to a reduction in demand and lower than expected growth rates.

While this is disappointing, this weakness should only be temporary and demand is expected to increase materially once the pandemic passes. And thanks to its leadership position in the market, Appen is well-positioned to capture this demand.

Last week Citi retained its buy rating and $30.90 price target on the company’s shares. Based on the latest Appen share price, this implies potential upside of almost 83% over the next 12 months.

ELMO Software Ltd (ASX: ELO)

Another ASX growth share to consider buying is ELMO. It is a cloud-based human resources and payroll software company.

It streamlines a range of processes such as employee administration, recruitment, on-boarding, remuneration, and payroll through a single a unified platform.

Demand has been strong for its platform in recent years and this has continued in FY 2021. During the first half, the company reported a 42.8% increase in annualised recurring revenue (ARR) to a record $74.2 million.

Positively, this is still only a very small slice of its addressable market. At present the company is operating in both the ANZ and UK markets, where it has $2.4 billion and $6.8 billion opportunities, respectively. And thanks to its jurisdiction agnostic platform, ELMO has the option to expand into other regions in the future.

Morgan Stanley is positive on ELMO’s growth prospects. It has an overweight rating and $9.70 price target on its shares. Based on the current ELMO share price, this equates to potential upside of 70% over the next 12 months.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

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 Appen Ltd. 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.

Related Articles…

Latest posts by James Mickleboro (see all)