There are a number of ASX200 shares that could be worth buying for growth.
When businesses become huge, it gets very difficult for them to deliver strong returns over the longer term. It’s the difficulty with huge numbers. That’s one of the main reasons why I’m not trying to buy shares of companies like Westpac Banking Corp (ASX: WBC), BHP Group Ltd (ASX: BHP) or Woolworths Group Ltd (ASX: WOW).
But at the other end, there are some businesses with lots of growth potential but they are priced almost to the moon for it.
Instead, I think these ASX 200 shares could be good value ideas for long term growth:
Altium Limited (ASX: ALU)
The strengthening of the Australian dollar has helped push the Altium share price down by more than 20% since 22 October 2020. I think this could prove to be a buying opportunity whilst many other businesses are priced highly.
Altium’s underlying profit/earnings per share (EPS) grew by around 5% in the FY20 result, even after all the COVID-19 disruption. In FY21 the electronic PCB tech business is expecting revenue to grow to revenue to at least US$200 million. It’s still aiming for US$500 million revenue by FY25 (or perhaps FY26), with the goal of reaching 100,000 Altium Designer subscribers in that time.
There has been 40% growth of Altium 365 adoption since July 2020. This is the online offering for software engineers to collaborate together. It now has 7,486 monthly active users and 3,739 monthly active accounts.
Over the long term, this ASX200 share could become the clear global leader of its industry.
Using CommSec projected profit numbers, Altium is valued at 41 times the estimated earnings for the 2023 financial year.
EML Payments Ltd (ASX: EML)
EML Payments is a business that provides various services for clients such as physical gift cards, virtual gift cards and accounts, salary packaging offerings and so on.
The world is going increasingly digital, as opposed to cash, so EML is in the right space to benefit from this. COVID-19 caused a painful disruption to the shopping centre gift card segment in 2020, but overall growth is rebounding.
In the first quarter of FY21 compared to the prior corresponding period, gross debit volume (GDV) was up 51%, revenue was up 75% and EBITDA (EBITDA explained) was up 215%.
I’m not expecting triple digit EBITDA growth rates for many consecutive years, but it shows how much traction the ASX200 share is getting.
Magellan Financial Group Ltd (ASX: MFG)
I’ve been writing about Magellan a lot recently, but that’s because I think it ticks quite a few boxes at the moment.
In FY20 its underlying EPS grew by 17% and the average funds under management (FUM) grew by another 26% to $95.5 billion. In the latest monthly update for November 2020 we learned that the Magellan FUM was around $103 billion.
Magellan continues to be innovative with its core funds management business. It’s launching a new retirement product soon. It’s also starting to make investments in private businesses with strong growth potential like Barrenjoey and Guzman y Gomez. I believe there’s plenty of long term growth potential here.
Using CommSec projected profit numbers, Magellan is valued at 16 times the estimated earnings for the 2023 financial year.
Other large ASX growth shares that I’ve got my eyes on include Brickworks Limited (ASX: BKW), Collins Foods Ltd (ASX: CKF) and Ingenia Communities Group (ASX: INA).
