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5 Attractive growth shares to consider amidst current volatility

  • April 14, 2020 02:27 PM AEST
  • Team Kalkine
5 Attractive growth shares to consider amidst current volatility

Stock markets are always subject to market risks with lots of ups and downs. In recent months, the increased volatility in the market has resulted in high anxiety amongst the investors. If the investors take decision based on short term volatility, it will impact the long term benefits. Choosing an investment decision in the current situation, which doesn’t seem to improve over time, is putting the investors in a quandary. This dilemma has led to panic in the stock market across the globe with the investors unable to judge the potential of their investments. The uncertainty has led to investors jumping from one stock to another resulting in fluctuations in the markets.

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Keeping the uncertainty aside, we have provided some information on growth stocks which might rescue you in the times of uncertainty.

ALSO READ: Are you a Growth Investor? Then You Must Wear the Hat of a Psychologist!

Growth stocks are the stocks which provide growth higher than the average rate of the market. Some common characteristics which can be easily identified are increasing returns and prices, improved financials, large market capitalisation and stable earnings.

Emeco Holdings Limited (ASX:EHL)

Emeco Holdings Limited is engaged in selling, maintaining, and leasing heavy earthmoving gear to mining industry customers in Australia as well as abroad.

Increase in Earnings and Strong Profitability: Emeco released its half-year results for the period ending 31 December 2019 wherein it reported strong earnings growth with operating EBITDA in line with the management guidance and delivering on strategy. During 1H20, the Company witnessed an increase of 10% in revenue to $246.5 million and a growth of 16% in operating EBITDA to $119.1 million.

Completion of Pit N Portal Acquisition: The Company recently completed the acquisition of Pit N Portal. This acquisition will provide a comprehensive hard rock underground mining and equipment service offering and will almost double the gold exposure of EHL.

Future Expectations and Growth Opportunities: The Company is focusing on improving utilisation and margin expansion, setting EHL for further growth in 2020. Emeco will integrate Pit N Portal business into its operations to facilitate growth and expect four months of earnings with CAGR of ~ 15% to be achieved in FY20 and FY21.

Bottom line: EHL is well-placed to generate more robust earnings and cash flow and is on track to build a business of scale and quality, ensuring a healthier and more resilient business. It has also deleveraged its positions and has strengthened its balance sheet.

EHL stock was trading at $1.165 on 14 April 2020 (At 01:05 PM AEST), an increase of 5.43% over its previous close.

Praemium Limited (ASX:PPS)

Praemium Limited offers managed accounts technology, CRM as well as financial advice software, and portfolio administration for the wealth management industry.

Robust Financial Results and Broadening of the Addressable Market: The Company recently released its interim results for the period ending 31 December 2019 wherein it reported an increase of 12% in revenue to $24.2 million and a record underlying EBITDA of $7 million, reflecting an increase of 24% on 1H19. Additional diversification of the business and the significant broadening of the Company’s addressable market and product offering have resulted in a steady growth in international business, which continues its drive towards inflection.

1H20 Financial Highlights (Source: Company Reports)

Future Expectations and Growth Opportunities: The Company expects Australian specialist platforms to grow from 5% to 12% in 5 years and anticipates improving adviser efficiencies from VMAAS. PPS will continue to invest in products with enhancements to be delivered in the FY20. It has substantial cash reserves to further invest in earnings enhancing initiatives, including organic and strategic opportunities, as well as manage any future foreign currency impacts of overseas operations the Company.

Bottom line: The Company is pioneering R&D advancement that can support advisers in understanding and awareness of client satisfaction. PPS is also expanding its sales team in Australia and is recruiting for the UK and in key offshore markets for a more significant business development resource for 2020.

PPS stock was trading at $0.310 on 14 April 2020 (At 01:05 PM AEST), an increase of 5.085% over its previous close.

Baby Bunting Group Limited (ASX:BBN)

Decent Growth in Revenue and Profit: Baby Bunting Group Limited is a major specialty retailer in Australia, primarily for baby goods which caters to parents with children up to the age of three years. The Company’s principal products include toys, cots and nursery furniture, car safety, and babywear, among others. During 1H20, total sales of the Company went up by 8.1% to $186.4 million, and EBITDA witnessed an increase of 21.7% to $14.3 million. The Company has seen a healthy start to the second half with a growth of 5.7% in sales both in-store and online. During 1H20, gross profit of the Company was $68.9 million, reflecting an improvement of 15% on the prior corresponding period.

Future Expectations and Growth Opportunities: The Company had a solid start to the FY20 and is on track to deliver significant results in the year. BBN is leveraging its scale to provide improved ranging; service offers and profitability. The Company also expects to open one new store in 2H20 and anticipates no disruption from coronavirus.

Bottom line: During the second half (30 December 2019 to 22 March 2020), total sales growth of the Company stood at 12.4%, and comparable store sales growth was 6.2%. The Company is making appropriate adjustments to reduce costs and capital expenditure and is continuously investing in business transformation to build capacity for future growth.

BBN stock was trading at $2.700 on 14 April 2020 (At 01:05 PM AEST), an increase of 2.662% over its previous close.

BINGO Industries Limited (ASX:BIN)

BINGO Industries Limited provides recycling and waste management solutions in areas such as industrial waste streams, building and demolition. The Company has capabilities including processing, waste collections, separation as well as recycling waste value chain’s components.

Strong Pipeline of Opportunities and Decent Growth in Revenue: During 1H20, the Company reported an increase in revenue of 50.7% to $271.2 million and a growth of 67.9% in EBITDA to $78.8 million. BIN also reported a positive trend in EBITDA margin with an increase of 690 bps to 33% and a growth of 31.9% in underlying NPAT of $28.4 million. This resulted in the EPS increasing to 5.8 cents per share, from 2.5 cents per share.

1H20 Financial Highlights (Source: Company Reports)

Future Expectations and Growth Opportunities: BINGO has established its operational footprint in NSW and VIC and is focusing on realizing the significant value opportunity from an extensive network of assets. BIN is well-positioned to benefit from an increase in the Victorian waste disposal levy in 2020 and expects to achieve robust year-on-year growth in FY20. The Company has witnessed an improvement in margins and expects slight moderation in 2H20.

Bottom line: BINGO continues to strengthen its governance framework and has made significant changes in sustainability goals this year. The Company has expanded its total network capacity across NSW and Victoria and is anticipating delivering positive results for shareholders in the coming years.

BIN stock was trading at $2.110 on 14 April 2020 (At 01:05 PM AEST), an increase of 3.431% over its previous close.

Freedom Foods Group Limited (ASX:FNP)

Freedom Foods is involved in manufacturing, selling, and distributing plant & dairy beverages as well as snacks and specialty cereal.

High Growth in Various Jurisdictions: During FY19, the Company witnessed high growth in various jurisdictions including Australia, South East Asia and China. During 1H20, the group finalised to upgrade the total processing capacity to 500 million litres per annum which will support the growth in UHT filling capability at Shepparton. In the same period, the Company reported a stable balance sheet with significant progress made on inventory management and total net borrowings of $188.5 million.

1H20 Financial Highlights (Source: Company Presentation)

Future Expectations and Growth Opportunities: FNP is well-positioned to build into a major global food and beverage business with a larger scale in key food and beverage platforms, offering diversification in sales and earnings growth. The group intends to expand this direct supply strategy in key Victorian supply regions to cater to the growing demand for milk. Freedom Foods Group Limited is leveraging its increasing dairy capabilities to build a branded high margin product portfolio in specialty nutritional products.

Bottom line: A diversified portfolio coupled with the growing scale of business, puts Freedom Foods in a relatively stable position amid the current market disruption.

FNP stock was trading at $4.440 on 14 April 2020 (At 01:05 PM AEST), an increase of 4.471% over its previous close.


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