The S&P/ASX 50 index is home to 50 of the largest listed companies on the Australian share market.
This means the index is home to many of the highest quality and most well-known companies that the ANZ region has to offer. While there are a number of quality options, two that could be standouts are listed below. Here's why they are rated as buys:
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NEXTDC Ltd (ASX: NXT)
NEXTDC is a leading data centre operator with a portfolio of nine world-class centres in key locations across the country. It may also be adding to this network in the near future after announcing provisional plans to expand into both Singapore and Tokyo.
While this expansion could provide NEXTDC with a huge runway for growth in the future, its long term prospects in Australia are also very positive. Thanks to the structural shift to the cloud, demand for data centre capacity is growing quickly and underpinning strong revenue and earnings growth.
For example, during the first half of FY 2021, NEXTDC posted a 27% increase in data centre services revenue to a record $121.6 million and a 29% increase in EBITDA to $65.7 million. This was driven by a 33% lift in contracted utilisation to 71MW, a 16% lift in customers, and a 16% rise in interconnections.
Macquarie is a fan of NEXTDC. It currently has an outperform rating and $13.95 price target on its shares.
Xero Limited (ASX: XRO)
Xero is a leading cloud-based business and accounting software provider. Its platform provides businesses and their advisors with a solution that offers deep cloud accounting functionality and an ecosystem of over 800 third-party app partners.
Demand for its platform has been growing strongly over the last few years. This is being driven by the ongoing shift to cloud accounting solutions and its international expansion.
The good news is that its growth doesn't appear likely to end any time soon. For example, in FY 2021, Xero reported operating revenue of NZ$848.8 million. This represents just 1.9% of its total addressable market which is estimated to be worth NZ$45 billion at present.
Goldman Sachs is positive on Xero and believes it is well-positioned for long term growth. This is due to the quality of its offering, the ongoing shift to cloud-based solutions, its global market opportunity, and burgeoning app ecosystem. Goldman has a buy rating and $153.00 price target on its shares.
