Today, we’ll look at the top 5 stocks listed on the ASX that we think have strong growth potential.
Some of these stocks have already made strong gains and have a lot more upside potential to go.
With record low-interest rates boosting capital markets, growth stocks which are highly leveraged to a bullish market will benefit most.
Some of these stocks are also digital, which means they are highly geared into a post-virus world.
The Best Growth Stocks To Buy Now For 2021
We’ve outlined 5 stocks that we have found to have a good business plan with lots of upside potential and represents some of the best that the ASX has to offer.
City Chic Collective (ASX CCX)
City Chic is a leading plus-size women’s clothing retailer with 801,000 active customers.
The company has been going from strength to strength in its business strategy.
City Chic’s focus on an omnichannel model with a heavy focus on online retailing has helped it thrive during the COVID pandemic.
The company has also made a number of great acquisitions, taking advantage of distressed assets due to the pandemic.
In addition, CCX is rapidly growing its footprint in the US and UK which has helped the company achieve 31% revenue growth in FY20.
Domino’s Pizza Enterprise (ASX DMP)
Domino’s has thrived in the Covid-19 environment where online sales of food and a crush in disposable income helped to drive record revenue growth.
DMP’s approach to targeting their niche market and the use of technology is unrivalled by any other fast-food company in the world.
With automation of delivery such as drone deliveries around the corner, we expect Domino’s to have good upside coming into the next few years.
Healius (ASX HLS)
Healius is a healthcare services provider with three main businesses – pathology, imaging and medical centres.
With an aging population and a growing pathology industry, Healius is well-positioned to take advantage of the growth in this industry.
Even though the company has underperformed recently, a lot of this can be attributed to COVID-19.
As the world starts to dig itself out of the COVID-19 issue, we should see a strong rebound in revenue as a backlog of revenue is realised.
With an NTM EV/EBITDA valuation 10x lower than the likes of Cochlear (ASX COH) and 3.4x lower than CSL (ASX CSL), Healius is a good option to get exposure to healthcare with more upside potential in lieu of the more expensive options.
Xero Limited (ASX XRO)
Xero offers a cloud-based accounting software platform for small and medium-sized businesses.
Cloud computing is the delivery of on-demand computing services.
This includes servers, storage, databases, networking, software and analytics over the Internet (“the cloud”) to offer innovation, flexibility, and economies of scale.
Cloud computing is the next big thing as it allows mobility, a distinct advantage during the COVID-19 pandemic.
Given the volatility surrounding the coronavirus, the Xero share price along with almost every other stock was sold off during the early phase of COVID-19.
However, it has bounced back and regained nearly all its share price losses since then.
Additionally, Xero delivered strong financial results for the FY 2020 financial year.
The company invested heavily in software development, enabling its software business to achieve consistent revenue growth of 30-40%.
Over the past five years, the company has significantly overperformed the ASX index by about 490%.
Opthea (ASX OPT)
Opthea Limited is an emerging healthcare company that specialises in developing novel treatments for chronic eye diseases such as age-related macular degeneration.
Macular degeneration, also known as age-related macular degeneration (AMD), is the leading cause of legal blindness in Australia, responsible for 50% of all cases of blindness.
Opthea’s main focus is on its OPT-302 combination therapy which focuses on targeting wet age-related macular degeneration and diabetic macular edema.
Last year the company unveiled strong study results for OPT-302 which was shown to deliver statistically significant results in patients.
Opthea also anticipates the potential for the therapy to be used for Diabetic Macular Edema (DME), which is an even more lucrative market.
Combined, this gives OPT-302 a market opportunity of almost US$10 billion.
Earlier this year, Opthea was added to the S&P/ASX 300 index during June.
According to the company, Opthea’s inclusion to the index could help diversify the shareholder base as its OPT-302 advances through clinical stages.
Opthea has continued to demonstrate that its treatments are not only effective but address a debilitating condition that affects a significant percentage of the population, through its successful trials.
Over the past 5 years, the company significantly outperformed the ASX by 1,215%.
How Do We Find Growth Stocks To Buy?
Growth stocks are generally driven almost entirely by qualitative factors such as first mover advantage, quality and quantity of assets, permits and technology.
Quantitative factors such as profit, revenue and so forth generally take a back seat.
Even though it is imperative that their financials are sound, when it comes to growth stocks, we are buying the story and perceived future value.
However, the very nature of valuing companies through qualitative factors means that there is a lot of room for error, opinion and subjectivity.
This means that high growth stocks tend to be small-cap, high risk and highly speculative.
The hardest part when it comes to finding growth stocks is the ability to process the information and factors at hand to make a good judgement call.
Our Research team specialises in this and has combed the ASX for some of the best growth stocks on the Australian market.
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Picking the best stocks to buy now, timing the entry and having an edge in the market is not easy.
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This is general advice only. MF & Co Asset Management has not considered your personal financial needs, objectives or current situation. This information is not an offer, solicitation, or a recommendation for any financial product unless expressly stated. You should seek professional investment advice before making any investment decision.