There are some ASX growth shares that are so good they could be worth a spot in every portfolio.
Here are two leading ASX growth shares that could fit into any portfolio:
A2 Milk (ASX: A2M)
A2 Milk is one of Australia and New Zealand’s largest infant formula producers and the leader in a2-only protein based dairy products. It has operations in New Zealand, Australia, USA and China thanks to key supply and distribution agreements.
I think it’s a great ASX growth share. I believe it offers reliable earnings, even in a downturn, because food is one of the most important things we could pay for. Infant formula is an essential product. Liquid milk is a staple for many households. I think A2 Milk has shown how reliable its demand is through this COVID-19 period. It has built a reputation as a quality, trusted brand for families.
There are few shares on the ASX that are growing overseas as well as A2 Milk. China and the US are two huge markets with gigantic populations compared to New Zealand and Australia. The company has a large total addressable market with just these two countries. A2 Milk will soon be making money from Canada as well.
A2 Milk has a great balance sheet. There’s no debt and a large, growing cash balance. That cash could be used for acquisitions or shareholder returns (dividends or share buy backs).
According to CommSec, the A2 Milk share price is valued at 34 times the estimated earnings for the 2021 financial year.
Altium (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.
Altium is another great ASX growth share for me. It’s one of the few ASX shares with a truly global customer base. Clients include Toyota, Mercedes, BMW, Volksvagen, Bosch, Lockheed Martin, Boeing, NASA, Space X, John Hopkins, CSIRO, IBM Research, Cochlear (ASX: COH), ResMed (ASX: RMD) Microsoft, Amazon, RIM (Blackberry), Lenovo and so on.
The software business is aiming for global domination of the electronic PCB software market in the same way that Microsoft completely won the office software market. Altium is aiming for 100,000 Altium Designer subscribers by 2025, along with US$500 million of revenue, which would be a lot of growth from the FY20 result.
Altium is also debt free and it has a growing cash balance. The ASX growth share finished FY20 with a cash balance of over US$90 million.
Whilst FY20 was tough due to COVID-19, it has continued to grow its market share with new customer wins. I like that Altium pays a growing dividend. Considering that interest rates are really low, I think the Altium share price isn’t too expensive as it’s valued (according to CommSec) at 60 times the estimated earnings for FY21.
I think these two growth shares are among the best on the ASX, and they aren’t trading at crazy valuations – particularly for how much their profit could grow in the coming years. I’m also interested in ASX growth share Bubs (ASX: BUB) which I wrote about here.