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?
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.
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.
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.
The post These 3 ASX growth shares pulled back on Friday. Should you invest? appeared first on Motley Fool Australia.
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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.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020