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3 ASX growth shares for your watchlist

There are some great ASX growth shares available to Aussie investors that should be on your watchlist.

Over the longer term, I believe that it will be the businesses that deliver strong compounding profit growth that make the best returns.

A watchlist can be useful. It can be a list of businesses that you’re going to research more, that you might buy on a dip or simply ones that you might buy the next time you have some money available.

These ASX shares are delivering great growth and could be solid long term ideas in my opinion:

Pushpay Holdings Ltd (ASX: PPH)

When you consider the types of things that you want to see from a growth share, I think that Pushpay ticks all of the boxes. The electronic donation business, which specialises in helping large and medium US churches, is one for the watchlist in my opinion.

It has a large addressable market, with long term goals. Pushpay is aiming for a 50% market share of the large and medium US church sector, which it thinks could result in annual revenue of US$1 billion.

Pushpay has growing profit margins. In the HY21 result alone it saw excellent improvement in margins with the EBITDAF margin (EBITDA explained, the F stands for foreign currency) rising from 17% to 31%.

The company is generating great cashflow. HY21 saw operating cashflow, which some investors think is the best profit measure, grow by 203% to US$27 million.

One of the most attractive things is that the company continues to outdo its profit guidance. In FY21 Pushpay is now expecting EBITDAF to be in a range of US$56 million to US$60 million.

Using CommSec profit projections, Pushpay shares are valued at just 19 times the estimated earnings for the 2023 financial year.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is a business that I think still has plenty of shareholder returns potential, even though it has already grown so much.

I believe the business can continue to grow its funds under management (FUM). It has attracted a few billion of FUM each year over the last few years, which I don’t think will change any time soon as long as Magellan keeps pace (or outperforms) its respective benchmarks over the longer term.

Magellan’s investment style isn’t likely to deliver huge outperformance, but its share picks like Microsoft, Alphabet and Apple should be able to deliver good growth over time.

Another way for the ASX growth share to unlock (a lot) more growth could be the upcoming announcement of the retirement product that will hopefully be released this year. Australia has a huge superannuation pool of assets that may need to find a home.

Finally, I think the investments in Barrenjoey and Guzman y Gomez could turn out well and bodes well for other potential investments in the future.

Using CommSec profit projections, Magellan shares are valued at 16 times the estimated earnings for the 2023 financial year.

Redbubble Ltd (ASX: RBL)

Redbubble is the final ASX growth share on my list.

This e-commerce business, which sells artist-designed products like wall art and clothes, has a very promising future in my opinion.

It’s aiming for $1 billion of revenue in the longer-term. The online artist marketplace company has continued to see strong growth after an impressive FY20 report. It revealed that marketplace revenue soared 116% to $147.5 million. Gross profit grew even faster, rising by 149% to $64.5 million. Operating cashflow shot up by 166% to $27.1 million, up from $10.2 million in the prior year.

If Redbubble can go on to be a global leader in its category then it could become a really big business, with high profit margins. It’s generating a very pleasing level of cash right now.

There are plenty of other ASX growth shares to keep your eyes on too, like EML Payments Ltd (ASX: EML) and Altium Limited (ASX: ALU).

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At the time of publishing, Jaz owns shares of Altium.

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