ASX growth shares are businesses that are growing quickly and expecting to achieve even more in the next few years.
Not every business is growing at a fast pace. Plenty of companies that are growing quickly are not rated as buys by experts.
But these stocks are ones that are growing rapidly and rated as buys at the moment:
Baby Bunting Group Ltd (ASX: BBN)
Baby Bunting is the leading Australian retailer of baby and toddler products including prams, toys, clothes and so on.
FY21 saw a lot of growth. Total sales rose 15.6% to $468.4 million, with online sales rising 54.2% to $90.8 million. Pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 29.2% to $43.5 million, with an increase of the EBITDA margin by 97 basis points to 9.3%. Pro forma net profit after tax grew 34.8% to $26 million.
Baby Bunting continues to work on a number of areas including online sales growth, gross profit margin improvement, new stores and expansion into New Zealand.
In FY22 to 3 October 2021, the ASX growth share saw its gross profit margin improve another 120 basis points to 38.7%. It's expecting to open between six to eight stores in Australia in FY22 as well as two in New Zealand towards the end of the second half of FY22.
It is currently rated as a buy by the broker Macquarie Group Ltd (ASX: MQG) which noted the company's ongoing growing strength of the business with increasing profitability, partly due to the increasing percentage of sales that are exclusive to the ASX growth share or are private label brands.
Based on Macquarie's numbers, the Baby Bunting share price is valued at 22x FY23's estimated earnings.
Pinnacle Investment Management Group Ltd (ASX: PNI)
Pinnacle Investment Management is a business that partners with affiliate investment businesses that can demonstrate growth potential and whose management teams have strong track records.
It has a number of investments including Coolabah, Firetrail, Hyperion, Langdon, Plato, Solaris and Spheria.
In FY21, it experienced its net profit more than doubling, with an increase of 108% to $67 million. Pinnacle's share of affiliate net profit was $66.4 million, an increase of 75%. This was partly driven by funds under management (FUM) growth of 52% over the year to $89.4 billion.
Pinnacle continues to expand its portfolio to diversify and grow its portfolio and earnings. For example, it recently announced that it is going to buy a 25% stake of private equity group Five V Capital.
The ASX growth share has also partnered with Greg Dean, former principal manager at Cambridge Global Asset Management, to launch its first North American affiliate which will be based in Toronto (in Canada). This will have global and Canadian small cap equities strategies.
Pinnacle has previously said that the opportunity for further growth in funds under management is "significant".
This week, Pinnacle also announced that for the six months ended 31 December 2021, its net share of crystallised performance fees from four affiliates' is "in the order of $6.2 million". In the second half of FY22, all 18 of its affiliates' strategies will have the potential to crystalize performance fees.
Pinnacle is currently rated as a buy by Ord Minnett, with a price target of $17. At the current Pinnacle share price, it is valued at 28x FY23's estimated earnings.
