ASX growth shares could be the best way to invest to produce market-beating returns. Businesses that are compounding at a strong rate can lead to good wealth creation because of how they can grow to larger and larger financial numbers.
Australia is a great country to live in and do business in. But it's the investments that give us exposure to international growth that can do particularly well over time because the US and other countries have much bigger populations and economies than Australia.
With that in mind, below are three ASX growth shares I really like, which is why I'm invested in two of them. If I had $7,000 to invest today, I'd happily split it between these three names.
Lovisa Holdings Ltd (ASX: LOV)
Lovisa is a leading retailer of affordable jewellery with a network of stores around the world.
The business is opening stores across the world at a very fast pace, rapidly diversifying away from Australia. In FY23, the business grew its store network by 27%, or 172 stores, to 801 which included an extra 72 stores in the US to reach 190 stores.
Lovisa earns good margins at each of its stores, and it's quite cheap for the business to open new stores. Despite the cost of opening all of those new stores and entering new countries, the business was able to grow FY23 net profit after tax (NPAT) by 20.1% (on a 52-week basis) to $68 million.
It has recently entered markets like Mexico, Canada, Hong Kong, China, Spain and Vietnam. Added to other markets like Germany, the UK and the US, Lovisa still has plenty of growth potential ahead. I think it can double its store count over the next five years.
According to the projection on Commsec, the Lovisa share price is valued at 20 times FY26's estimated earnings.
Johns Lyng Group Ltd (ASX: JLG)
Johns Lyng is another one of my favourite S&P/ASX 200 Index (ASX: XJO) growth shares because it's growing in a variety of different ways.
Its core offering is rebuilding and restoring buildings and contents after an insured event, including flooding, storms, fire and so on. The company's main markets are Australia and the US.
The business is rapidly growing its earnings and capabilities in addressing catastrophes. In FY23, catastrophe revenue rose 125.3% to $371.3 million, helping total revenue grow 43.2% to $1.28 billion.
Johns Lyng is growing additional sources of earnings, which are defensive and recurring. It is acquiring body corp/strata service providers, as well as electrical, fire and compliance, testing and maintenance businesses (including Smoke Alarms Australia and Linkfire).
Its growing scale is delivering operating leverage, meaning profit is growing faster than revenue.
The US is a huge potential growth market, and it's looking at expanding to other markets. It recently entered New Zealand and management has indicated there could be further geographic growth down the track.
According to Commsec, the ASX growth share is valued at 29 times FY24's estimated earnings.
Vaneck Morningstar Wide Moat ETF (ASX: MOAT)
The exchange-traded fund (ETF) is one of the most exciting ETFs in my mind.
It invests in (US) shares that, in Morningstar's eyes, have strong competitive advantages that are expected to almost certainly endure for the next decade and more likely than not for two decades. In other words, these businesses need to have long-term economic moats that are hard for competitors to challenge.
The ETF only invests in these businesses when they're at a good price, compared to what Morningstar thinks they're worth.
That investment strategy has seen the MOAT ETF deliver net investment returns in the teens over the long term, though this isn't guaranteed to continue.
