How I'd find ASX growth shares to buy today to double my money

This seems like a great time to invest in businesses with good growth potential.

| More on:
A girl is handed an oversized ice cream cone with lots of different flavours.

Image source: Getty Images

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

Key points

  • 2022 seems like a good time to go hunting for beaten-up bargains
  • I’m looking at ASX growth shares that are growing and have a presence internationally
  • Some businesses also have very attractive profit margins

The current investment environment has been painful for investors. Volatility is tricky when the value of one's portfolio sinks. But, it means that people scouting for opportunities may be able to find some juicy ASX growth share pickings after the declines we've seen.

It's important to remember that just because something has fallen in price doesn't necessarily it's better value. Something could go up in value and be cheap, and something else could fall in value and be expensive.

Keep in mind that if something falls by 50%, then clawing back to its former price would be a return of 100%.

How I'd find ASX growth shares to buy

There is a lot of financial pain at the moment, with inflation hurting the expense side of businesses. It also hurts the valuation of companies because it's driving central banks to increase interest rates to try to reduce demand in the economy.

Higher interest rates do put pressure on valuations, in theory at least.

I'm looking for companies where the valuation has been punished, yet the revenue for the business still looks promising for the long term (and perhaps even in the short term).

I think that ASX growth shares that are already market leaders in their sector — or have a compelling chance to be — are exciting ideas.

Businesses that are growing globally are particularly interesting to me because their addressable market is a lot larger. The world is a bigger market than just Australia alone.

I believe that companies with good profit margins, and the potential to grow their various profit margins further, are particularly compelling.

What opportunities could tick those boxes?

For me, the pool of opportunities has significantly grown this year. It's hard to choose.

While the three I'm going to name may not necessarily be first, second and third on my top buys list, I think all three of them are very compelling. Here's why.

Xero Limited (ASX: XRO)

This ASX tech share provides cloud accounting software to small and medium businesses worldwide. It had a global subscriber base of 3.3 million at the end of FY22, which was a year-over-year increase of 19%. Its main markets are Australia, the United Kingdom and New Zealand. But Singapore, South Africa and Canada are also growing markets.

The Xero share price has fallen by almost 50% since the beginning of 2022. I think it's much better value considering the company continues to grow. In FY22, its revenue grew by 29%, and the gross profit margin went up again by 1.3 percentage points to 87.3%.

It's not making a net profit after tax (NPAT) yet, instead, it's investing all of its excess money into more growth. I think this is a good use of the company's cash flow for long-term returns.

REA Group Limited (ASX: REA)

REA Group is the parent business of several real estate-related digital assets.

The key segment is its ownership of realestate.com.au, which is the market leader in Australia. Sellers want to use the property portal that gets the most potential buyers, potential buyers want to go to the property portfolio with the most houses to view (and useful property-viewing features). It's a useful, positive cycle for demand for realestate.com.au and allows it to implement regular price increases with little impact to demand.

The ASX growth share also owns several Australian-focused property sites such as realcommerical.com.au and flatmates.com.au.

Profitability continues to improve. In FY22, it reported that net profit grew by 25% to $408 million.

I also like that the company gives access to other markets, it has investments in property sites in India, south-east Asian countries and the United States. All of these markets have much bigger populations than Australia, which means they could generate good profits in future years.

Airtasker Ltd (ASX: ART)

Airtasker claims to be Australia's leading online marketplace for local services, connecting people and businesses who need work done with people who want to work.

It's another ASX growth share that has suffered a big sell-off in 2022, the Airtasker share price is down 60% in 2022 even though it continues to grow.

In the first quarter of FY23, revenue was up 80% to $10.5 million, or 36% to $8 million, excluding the Oneflare contribution, which is another marketplace that Airtasker recently acquired. The Oneflare marketplace performance is "tracking well ahead of expectations".

But it's also growing internationally at a fast pace. It has a small but growing presence in both the UK and US. UK gross marketplace volume (GMV) grew 68% year over to £4.2 million, annualised. The number of US-posted tasks grew by 4.7x year over year to 13,000.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Airtasker Limited. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended REA Group Limited. 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

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 »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
Growth Shares

3 ASX 200 shares set to dominate the next decade

Let's see why these shares could be great long term picks for Aussie investors.

Read more »

A group of businesspeople clapping.
Growth Shares

3 ASX growth shares with 10-year compounding potential

Let's see which shares are being tipped as buys for growth investors.

Read more »

Woman happy and relaxed on a sofa at a shop.
Growth Shares

Are these 2 top ASX growth shares buys?

Are these high-flyers still buys?

Read more »