A2 Milk and 1 other ASX growth share to watch this week

The A2 Milk Company Ltd (ASX:A2M) is one of my growth picks on the ASX 200 for this week.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Although the S&P/ASX 200 (INDEXASX: XJO) index has dipped on trading today from Friday's levels, it is still close to its all-time high – ensuring that growth investors have remained a happy bunch. With falling interest rates and a truce in the US–China trade war (at least for now), there is every reason to expect further upside in the markets (at least for the short-term). During these happy times, jumping on the wagon of companies that have successful business models with strong revenue growth continues to be a winning trend.

Here are two ASX companies that have proven to be winners before and show no signs of changing their stripes.

A2 Milk Company Ltd (ASX: A2M)

The a2 Milk Company has been a favourite for growth investors for a while now, and for good reason. The a2 share price has risen by more than 2,512% over the past 5 years (not a typo) and the shares are up more than 40% for the year so far to boot! The company has been growing its impressive numbers with insatiable demand from the Chinese market, as well as its expanding American efforts.

The company provided an update in March and revenue numbers were up 41%, year-on-year. There is definitely a lot of petrol (or milk?) left in the tank for a2 Milk and I believe the company has a long growth runway ahead of it.

Xero Limited (ASX: XRO)

Xero is another investor favourite and backs this up with a membership of the exclusive and high-growth WAAAX club (a group of Australia's better-known technology stocks). Xero sells its "beautiful" accounting software as a cloud-based software-as-a-service (SaaS) subscription and has been dominating in its market.

For the year ending 31 March, Xero announced a 32% year-on-year growth rate for revenue, while subscriber growth came in a 31%. While Xero is still not a profitable company (posting a $27.1 million loss for the period), the company is clearly focusing on revenue growth and the lack of profitability is (in my opinion) not worth much concern at this point, considering these strong numbers. Xero has a remarkably sticky customer retention rate and is a worthy growth company to merit consideration this week.

Foolish takeaway

Both of these companies have demonstrated they have what it takes to be quality buy-and-hold shares. Whether you're willing to pay today's prices for them will be a personal call, but I'm confident in both companies' abilities to dominate their respective fields over the next decade.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Growth Shares

Young woman waiting for job interview.
Growth Shares

Australian job ad volumes declined last month. Are Seek shares a sell?

Should investors seek returns elsewhere?

Read more »

happy investor, share price rise, increase, up
Growth Shares

The best ASX growth shares to buy now

These growth shares have been recommended as buys.

Read more »

A young well-dressed couple at a luxury resort celebrate successful life choices.
Growth Shares

Where to invest $2,500 in ASX shares in August

Let's see which shares are being tipped as buys for next month.

Read more »

Person pointing at an increasing blue graph which represents a rising share price.
Growth Shares

What to buy now with the ASX at a record high

Analysts think these shares could still rise strongly from current levels.

Read more »

A young man looks at a stylised investment graph superimposed on an exterior office building backdrop.
Growth Shares

Where to invest $10,000 in ASX 200 stocks today

Analysts think these high-quality shares are in the buy zone for investors right now.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Growth Shares

Two ASX industrials shares with buy recommendations

One broker believes these growth shares are set to rise.

Read more »

Man smiling at a laptop because of a rising share price.
Growth Shares

I think these 2 exciting ASX growth shares are buys today

These stocks could deliver big returns.

Read more »

a man in a business suit and carrying a laptop stands smiling with hand in pocket outside a large office building in a city environment.
Growth Shares

Buy these 2 impressive ASX 200 shares in July: experts

Experts are bullish about these two businesses.

Read more »