5 ASX shares I'd be thrilled to find in my Christmas stocking this year

I'd love to be given these stocks.

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It's only a week until Christmas! While many people may be thinking about wrapping presents this week, I'd like to have some fun by thinking which ASX shares I'd like to be given.

The stocks I'm going to talk about are excellent businesses, but they're not priced cheaply. The market knows how good they are.

It's hard to justify investing a lot of my own money at the current prices, but I'd love to own them. So, maybe Santa could put some share certificates in my Christmas stocking?

I'll name five that I currently don't own: Pro Medicus Ltd (ASX: PME), REA Group Limited (ASX: REA), WiseTech Global Ltd (ASX: WTC), Xero Limited (ASX: XRO) and TechnologyOne Ltd (ASX: TNE).

There are a few different reasons why I really like these five stocks.

Software creates strong financials

One of the great things about software offerings is that it's easy to grow – software can be replicated again for another client for almost no cost.

Software can also be provided at a very cheap cost, meaning these businesses can achieve a good gross profit margin. That means new revenue can lead to very rapid improvement in the profit levels of earnings before interest, tax, depreciation and amortisation (EBITDA) and net profit after tax (NPAT), with costs not scaling at the same pace.

Pro Medicus has an extremely high earnings before interest and tax (EBIT) margin of 67.2%. So, a large portion of new revenue turns into net profit.

I think all five ASX shares can deliver strong net profit growth over the next year five years. The bigger the revenue, the stronger the margins.

International growth

Australia is a great country to do business, but the country has a relatively small population, so the growth ceiling is quite low. But, companies that are able to successfully expand overseas open themselves up to a much longer growth runway.

Pro Medicus is winning an extraordinary amount of large contracts in the US, a huge opportunity with the large population and healthcare spending there. It's also aiming for growth in Europe.

REA Group, the owner of realestate.com.au, has done incredibly well at building a leading market position in Australia, But, it's also directly and indirectly invested in a number of Asian markets. REA India is a very exciting prospect as more of the country goes digital.

WiseTech is an integral part of the global logistics network, with many of the world's biggest freight businesses as clients. I think more global e-commerce will help grow WiseTech's earnings for the long term.

Xero is building a global subscriber base with a focus on countries like Singapore, South Africa, Canada and the UK.

TechnologyOne has a global software offering for businesses, universities, councils and so on. I like its international growth efforts (particularly in the UK), as well as a shift to software as a service (SaaS).

Long-term strategy

These ASX shares don't seem to just be rudderless and drifting year to year.

All of them seem to have a long-term plan for growth and profit improvement. Businesses that are executing on long-term plans are more likely to achieve success, in my opinion.

Great businesses typically don't just turn rubbish overnight – in my eyes, great businesses tend to keep performing, keep growing and delivering shareholder returns over the years.

Think of the best sports teams or sports players – if they have the right attitude then there's a very good chance most years will be very good. That's my take on the long-term winners continuing to win.

I wouldn't be surprised if these five ASX shares outperform over the next five years, though the short-term is uncertain.  

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Pro Medicus, REA Group, Technology One, WiseTech Global, and Xero. The Motley Fool Australia has positions in and has recommended WiseTech Global and Xero. The Motley Fool Australia has recommended Pro Medicus, REA Group, and Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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