These 3 ASX growth shares pulled back on Friday. Should you invest?

High profile growth names pulled back on Friday as the ASX 200 raced ahead. Could this be a buying opportunity?

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

The  S&P/ASX 200 (INDEXASX: XJO) and ALL ORDINARIES (INDEXASX: XAO) broke through 7,000 and with that momentum brought many leading names to record highs.

However, on Thursday and Friday last week, the market witnessed a sharp pullback on leading names such as Pointsbet Holdings Ltd (ASX: PBH), Electro Optic Systems Holdings Ltd (ASX: EOS), Audinate Group Ltd (ASX: AD8) and many more, despite the ASX 200 finishing higher. So, are these 3 ASX growth shares a buy today?

Pointsbet

The Pointsbet share price tumbled some 7% between Thursday and Friday last week. However, the share price is still up by more than 25% in 2020 and 300% on its $2 IPO price. In my view, the Pointsbet share price is extended and it would be best for investors to sit on their hands and wait for a better buying opportunity. In the coming months, investors could look forward to emerging news regarding the company's licence status in Michigan, online launch in Indiana and confirmation of launching in West Virginia.

Electro Optic Systems 

The Electro Optic Systems share price has also been surging in 2020, however it experienced a sharp decline on Friday, falling 4.40%. The company trades at a relatively expensive price-to-earnings (P/E) ratio of 46 but has previously announced a significant upgrade to its FY20 earnings before interest and tax (~70% growth) and revenue pipeline. Electro Optic has a strong backlog of work driven by a surge in demand of its drones and counter-drone technologies and I believe the company is one to watch when its share price provides a better risk/reward opportunity. 

Audinate Group

The Audinate Group share price also tumbled on Thursday and Friday, unable to push through to an all-time high. The market appears to be very excited about Audinate's professional digital audio networking technologies. Its product does away with heavy, expensive analog or multicore cabling, replacing it with low-cost, easily available CATe, CAT6 or fibre optic cable for a simple, lightweight and economical solution. The company also highlighted significant growth in its FY19 earnings before interest, tax, depreciation and amortisation and its cashflows, with both increasing by 395% and 249%, respectively. FY20 could be a breakout year for Audinate's financials if this momentum can continue. 

Foolish takeaway 

The markets are currently rife with opportunities but investors should stay grounded and avoid buying shares that have run up hard in recent times. I am very confident in the execution and fundamentals of Pointsbet, Electro Optic Systems and Audinate, but their share prices are not currently at an optimal risk/reward for my liking. However, investors should watch closely as these companies could be in for an explosive 2020. 

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO and Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended AUDINATEGL FPO and Pointsbet Holdings Ltd. 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 Share Market News

Animation of a man measuring a percentage sign, symbolising rising interest rates.
Share Market News

Here's when Westpac says the RBA will now cut interest rates

Will borrowers need to wait until the middle of next year for relief? Let's find out.

Read more »

Boys making faces and flexing.
Opinions

3 ASX 300 shares to buy and hold for the long run

I believe these stocks have loads of growth potential.

Read more »

Young girl drinking milk showing off muscles.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a great end to the trading week for ASX investors today.

Read more »

Hands reaching high for a trophy with a sunset in the background.
Record Highs

The ASX 200 Index is on its way to another all-time high today. Here's why

These blue chip stocks are driving the index towards a new record today...

Read more »

Group of friends trading stocks on their phones. symbolising the 3 most traded ASX 200 shares today
Share Market News

3 ASX mining stocks topping the most-traded list in October

Chinese stimulus news and company announcements likely contributed to the higher trading activity.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Share Gainers

3 ASX 200 stocks smashing the benchmark this week

These three ASX 200 stocks are leading the charge this week. Here’s how.

Read more »

Two people tired and resting after sports race.
Broker Notes

Fundie rates 2 ASX 200 stocks in short-term pain but with long-term gain potential

Blackwattle Investment Partners sees these 2 ASX 200 stocks as worthy of a buy and hold strategy.

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Why A2 Milk, EOS, GQG, and Mineral Resources shares are racing higher today

These shares are ending the week strongly. But why?

Read more »