In my opinion, the best way to beat the share market’s average return over the long term is to invest in good ASX growth shares.
So, here are two I’d be happy to buy today:
Webjet Limited (ASX: WEB)
Webjet is a digital travel business spanning both global consumer markets (‘B2C’) and wholesale markets (‘B2B’). It was established in 1998 and now claims to be the leading online travel agency (OTA) in Australia and New Zealand. Webjet says it was the world’s first to use ‘Travel Services Aggregator’ technology and is now leading the industry in blockchain innovation.
The company has seen its share price sink by around 50% over the past six months. There’s going to be some variability with travel sometimes and the Thomas Cook collapse hasn’t helped things.
But if you take a five year or ten year view today’s weakness could look like a very good buying opportunity. Businesses shouldn’t just be judged on their 12 month outlook. Webjet is investing in technology and new services to diversify its earnings. It’s very scalable and its EBITDA margin (click here to learn what EBITDA means) is expected to grow.
According to CommSec, Webjet is valued at just under 12 times the estimated earnings for 2021.
Altium Limited (ASX: ALU)
Altium is an Australian multinational software business that was founded in 1985. It now has offices globally in places like San Diego, New York, Boston, Munich, Shanghai, Tokyo and Sydney. Its software focuses on electronics design systems for 3D PCB design and embedded system development. Its services include Altium Designer, Altium Vault, CircuitStudio, CircuitMaker, TASKING and Octopart.
Whilst Altium’s share price hasn’t declined quite as heavily as Webjet, it is still down 12% in the past few weeks.
I think Altium looks like the best value compared to the other ASX tech ‘WAAAX’ shares. Most tech shares are trading quite expensively at the moment on a traditional price/earnings ratio perspective – but those tech shares are the same ones creating excellent revenue growth every year.
Altium may be one of the best options for growth on the ASX because it has a variety of software services – earnings diversification is important these days – which are all growing impressively, Altium is aiming to become the world market leader with big goals and its EBITDA margin is steadily rising.
The company keeps paying shareholders an ever-growing dividend, is investing in its products as much as it needs to and yet its cash balance keeps going up which could fund more bolt-on acquisitions.
According to CommSec, Altium is priced at 39 times the estimated earnings for the 2021 financial year.
At the current prices Webjet is probably better value, but Altium is a very high quality business so I’d be happy to add to my holding today.
Want some more growth ideas? You should look at the fast-growing businesses in the free report below.
Disclosure: Jaz owns shares of Altium at the time of writing, but this could change at any time.