Here’s an ASX growth share priced like a value stock: analyst

This 106-year old company only recently debuted on the ASX. One fund manager reckons it’s a golden opportunity.

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A smiling woman holds a bunch of flowers, indicating growth

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Despite the cool-off this year, many ASX growth shares still have high valuations.

For example, software maker Xero Limited (ASX: XRO) is trading at a price-to-earnings ratio of more than 1,000. That’s despite shaving 7.28% off its share price this year.

Shares for online retailer Cettire Ltd (ASX: CTT) are going for more than 200 times earnings, even though they suffered a 20% crash before a trading halt on Tuesday.

As value stocks have raged upwards, many experts have said the dip in growth shares is a golden buying opportunity. But with so many businesses still expensive, which ones do they mean?

Wilson Asset Management portfolio manager Tobias Yao has an idea.

Who wants 11 times PE ratio for a growth share?

Yao declared last week that he had found a business with tremendous growth potential, whose shares are trading at a value price.

Lynch Group Holdings Ltd (ASX: LGL) is a recent IPO [initial public offering], but it’s actually a business that’s been around for decades,” he told a Wilson video.

“It is the number 1 floral supplier in Australia.”

Lynch Group debuted in April as a public company with already a rich 106-year history under its belt as a private business. The Lynch Group share price went for $3.60 upon listing on the ASX and was trading at $3.70 at market close on Tuesday afternoon. 

Yao reckons the market is under-recognising the medium-term growth drivers for the business, which also sells flowers in the Chinese market.

“We think there will be earnings upgrades and perhaps a couple of inorganic M&A opportunities over time.”

But the best thing right now, according to Yao, is the appealing price.

“It’s on 11 times PE,” he said.

“We think this is a growth company priced [on] a value multiple.”

Already beating prospectus forecasts

Earlier this month, the western Sydney-headquartered company released a positive performance upgrade for the current financial year.

“For the upcoming period ending 27 June 2021, Lynch anticipates reporting a bumper result. This is expected to be well up on the earnings guidance outlined in its prospectus, released in early April on the ASX,” reported The Motley Fool’s Aaron Teboneras.

“As such, net profit after tax and amortisation (NPATA) is forecast to come in between $31 million and $32 million. Originally, Lynch predicted NPATA to stand at $28.7 million.”

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Tony Yoo owns shares of Cettire Limited and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Cettire Limited and Xero. The Motley Fool Australia owns shares of and has recommended Xero. The Motley Fool Australia has recommended Cettire Limited. 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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