5 ASX Growth Stocks for Strong Potential Returns

Investment in ASX dividend growth stocks can help Aussies to earn regular cash streams in the current uncertain environment. We have screened 5 ASX stocks which are expected to perform better than the average company within the same industry. Let’s take a closer look at these stocks and their recent updates.

The A2 Milk Company Limited (ASX: A2M)

Leading infant nutrition company, The A2 Milk Company Limited recently released its first half results for FY20. For the period, the company reported total revenue of NZ$806.7 million, EBITDA of NZ$263.2 million and Net profit after tax of NZ$184.9 million. The results reflect strong growth across core markets and product categories.

During the period, the company achieved strong growth in its liquid milk businesses in Australia and the USA and delivered an EBITDA margin of 32.6% which was better than expected due to its stronger underlying gross margin.

For FY20, the company is anticipating continued strong revenue growth across its key regions and expects its full year EBITDA margin is to be in the range of 29- 30%.

Notably, in the past six months, A2M stock provided a return of 17.54% on ASX.

Elmo Software Limited (ASX: ELO)

Leading providers of software-as-a-service (SaaS), cloud-based human resources and payroll solutions, Elmo Software Limited (ASX:ELO) reported a Statutory revenue of $23.6 million for the first half of FY20, up 33.9% on pcp.

Over the period, the company’s ARR grew to $52.0 million, driven by new customer acquisition coupled with cross-sell to ELMO’s existing customer base. Statutory revenue for 1H FY20 is $23.6 million, up 33.9% on pcp. Further, the company reported Annualised Recurring Revenue (ARR) of $52.0 million at 31 December 2019, an increase of 42.8% from 31 December 2018.

The company has recently announced an investment in Hero Brands Pty Limited of $1.18 million in exchange for 50% equity ownership with an additional contingent payment of $0.5 million, providing it with increased Research and Development capability.

On YTD basis, ELO stock has provided a return of 17.27%.

Origin Energy Limited (ASX: ORG)

Natural gas explorer and producer, Origin Energy Limited recently released the results of the first half of FY20. For the period, the company reported Underlying EBITDA of $1,590 million and witnessed an increase of 22% in free cash flow to $680 million, up from $556 million in 1H19. Further, the company has declared a fully franked interim dividend of 15 cps payable on 27 March 2020. The company is executing its strategy to deliver value in a changing energy market and is pursuing opportunities in hydrogen and LNG for transport.

The company is implementing actions to improve the profitability of its retail business by enhancing the customer experience and growing the revenue streams and believes that it is on track to achieve $100 million in savings in its retail business by FY21. Australia Pacific LNG is aiming total capital expenditure and operating expenditure in between $2.5 billion to $2.7 billion and is likely to make a cash distribution of $1.1 billion to $1.3 billion for FY2020.

Tabcorp Holdings Limited (ASX: TAH)

Gambling company Tabcorp Holdings Limited recently announced its interim results for the period ending 31 December 2019, wherein it reported an increase of 4.4% in group revenue to $2,913.9 million and a growth of 2.9% in Net Profit After Tax to $213.5 million. The decent financial performance enabled the Board to declare a fully franked interim dividend of 11 cents per share, which is to be paid on 18 March 2020.

H1FY20 Results (Source: Company reports)

Going forward, the company is aiming to accelerate realisation of benefits from data, personalisation and digital-in-venue capability and will work on managing its expenses with full optimisation.

The stock is currently at a PE multiple of 20.770x with an annual dividend yield of 5.67%.

Sonic Healthcare Limited (ASX: SHL)

Leading medical diagnostic companies Sonic Healthcare Limited recently released its results for the period ending 31 December 2019, wherein it reported an increase of 15% in revenue to $3,344 million and a similar increase in net profit to $256 million. The decent financial performance resulted in EPS to rise by 3.5% to 53.7 cents per share. The company has also declared a partially franked interim dividend of 34 cents per share which is to be paid on 25 March 2020.

The company is expecting organic growth in coming years and expects its FY20 EBIDA to be 6% to 8% higher than the underlying FY19 EBITDA. The company will continue to improve in services and efficiencies and will mitigate risk through geographical diversification.

SHL stock is trading at a PE multiple of 23.710x with an annual dividend yield of 2.89%.

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