ASX growth shares could be a smart way to go at the moment due to lower valuations following the recent ASX share market pullback. We're going to look at some of the businesses that are currently buy-rated.
While the ASX tech share suffering has gotten the most investor attention over the last several months because of AI worries, there are also non-tech opportunities that analysts have picked out as ideas.
Let's get into why these stocks could be compelling buys.
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ALS Ltd (ASX: ALQ)
Broker UBS describes ALS as a leading analytical and testing services business with operations across mining, natural resources, environmental, food, pharmaceutical, industrial and inspection sectors. Other services include sampling and remote monitoring.
UBS has a buy rating on the business, with a price target of $26. That implies a possible rise of around 30% over the next year from where it is at the time of writing.
The broker noted that there are signs of an early-stage recovery in the (resources) exploration cycle. Geochemistry demand "continues to skew" to major miners, despite the increase in junior and intermediate miner capital raising activity, suggesting that it's still "early stages in the exploration cycle".
UBS also said that ALS appears to be recovering previous geochemistry price discounts as demand increases.
The broker noted that initial FY26 underlying net profit after tax (NPAT) guidance implies 20% year-over-year growth. UBS thinks the ASX growth share's guidance implies a relatively conservative view on the margins, with the group operating margin (EBIT) set to increase by 80 basis points (0.80%) in FY26.
UBS concluded:
We maintain our buy rating on ALS with the stock trading at a 1yr fwd EV/EBITDA of 14x, in line with where the stock has traded at during previous exploration upcycles, albeit the current gold price is c.2.5x higher. Our Buy thesis is underpinned by the view that the record gold price should drive a recovery in exploration activity, supporting c.10% pa EPS CAGR for ALS over the next three years.
The ASX growth share is valued at 28x FY26's estimated earnings, according to UBS' estimates.
ARB Corporation Ltd (ASX: ARB)
UBS is also optimistic about is ARB, which the broker describes as an Australian manufacturer and retailer of 4×4 and automotive aftermarket accessories globally, servicing the retail aftermarket, wholesale distribution in offshore markets and direct to original equipment manufacturers (OEMs).
UBS currently has a buy rating on ARB with a price target of $25.50. This implies a possible rise of close to 20% over the next year.
The broker noted that the ASX growth share has faced some headwinds in the operating environment, but called it a high-quality business and believes that the brand is not broken.
UBS said that it's excited about the expansion opportunity in the US and noted that the ASX growth share has become significantly cheaper – it's down more than 40% in the last six months.
The broker pointed out that it's trading at a much cheaper price/earnings (P/E) ratio than it has done historically. Its three-year average of its forward earnings multiple has been 26.3x, according to UBS. It's currently trading at 20x FY26's estimated earnings and 18x FY27's estimated earnings.
UBS suggests that the company's EPS could grow at a compound annual growth rate (CAGR) of 11% over the next three years, including a steady increase of the profit before tax (PBT) margin to FY29 following the US tariff hit.
