There are a group of ASX shares that I like that could be good ideas for the next decade. They seemingly have long-term growth runways and could produce compounding returns.
Businesses that have high and growing margins have the potential to produce stronger profit growth and therefore potentially attractive shareholder returns. Profit is one of the main ways that investors value a business.
Pushpay Holdings Ltd (ASX: PPH)
This is a digital payments business that facilitates donations to large and medium US churches.
The rapid growth of donations is translating into strong revenue growth, but also it’s turning into higher profit margins.
FY21 saw revenue growth of 39%. This helped the gross profit margin increase from 65% to 68%. The EBITDAF margin (EBITDA explained, the F stands for foreign currency) saw a strong rise from 22% to 34%.
The ASX share is expecting more donation volume to occur as the US economy recovers and the nation continues to move to a digital system.
Pushpay also has growth aspirations in the Catholic segment, which could also open other doors to different things like education donations. It’s investing several million dollars in FY22, but it’s expecting to see the benefits of this in the coming years. Over time, it’s targeting a 25% market share in that sector.
In the longer-term, Pushpay could grow overseas, which would significantly increase the total addressable market.
According to CommSec, the last Pushpay share price is valued at 28 times the estimated earnings for the 2023 financial year. I think this is a pretty reasonable valuation for a business that is generating a lot of cashflow and could continue to see more growth over the coming years, particularly if it makes more acquisitions.
BetaShares Global Sustainability Leaders ETF (ASX: ETHI)
This is one of my favourite ASX share investment ideas for the long-term. Not only has it been producing good long-term investment returns, but it has also been done by only investing in businesses that have been identified as climate leaders.
The exchange-traded fund (ETF) also excludes businesses with direct or significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investment considerations. That excludes things like gambling, tobacco, weapons, animal cruelty, destruction of valuable environments, alcohol, junk foods, pornography and so on.
It starts with all of the large global shares, excludes all of the things I’ve mentioned and they need to be in the top one-third of performers in terms of carbon efficiency for their industry, or are engaged in activities that can help reduce carbon use by other industries.
The portfolio then consists of 200 of the remaining companies by market capitalisation. It’s a global portfolio and very nicely diversified.
The biggest 10 positions in the portfolio are: Nvidia, Apple, Visa, Home Depot, PayPal, Mastercard, Adobe, ASML, Toyota and Cisco Systems. These are quality names and most of them have a long profit growth runway.
All of this comes for an annual management fee of 0.59%, which is very reasonable in my opinion.
Past performance is no guarantee of future performance, but since inception in January 2017, it has produced net returns of 21.6% per annum. Whilst I don’t think 20%+ returns can continue with rising interest rates, I think it can outperform the ASX index over the longer-term because of the great underlying holdings.
