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Why I would buy Webjet and these ASX growth shares in May

James Mickleboro
growth shares

At present I believe there are a large number of growth shares on the Australian share market that would be great options for growth investors.

Three that I think are amongst the best on the market are listed below. Here’s why I would buy them:

NEXTDC Ltd (ASX: NXT)

Although its shares trade on a sky-high earnings multiple and therefore carry a lot of risk, I believe this data centre operator is capable of growing its long term profits at a rate that more than justifies this premium. This is because as the cloud computing boom accelerates, I expect demand for NEXTDC’s innovative data centre outsourcing solutions and connectivity services to increase significantly. In the first half of FY 2019 the company experienced a 28% increase in contracted utilisation and a 34% lift in interconnections. This ultimately led to underlying EBITDA growing 26% to $42.2 million.

Webjet Limited (ASX: WEB)

I think that this online travel agent is one of the best growth shares on the Australian share market. It has been an impressive performer over the last decade and this has continued to be the case in FY 2019 with more strong bookings growth. In the first half the company posted a 33% increase in revenue to $175.3 million and a 59% lift in net profit after tax to $31.8 million. A key driver of this growth was its WebBeds (B2B) business which grew its revenue by 72% and EBITDA by a whopping 136%. The latter meant that the WebBeds business is now the biggest contributor to its earnings. The good news is that management believes it is well-placed to continue its strong bookings growth over the medium term, which I expect to lead to above-average earnings growth over the next few years.

Xero Limited (ASX: XRO)

Xero is a cloud-based business and accounting software provider which has been growing at a very strong rate over the last few years. In the first half of FY 2019 the company delivered a 37% increase in revenue to NZ$256.5 million. It also finished the period with Annualised Monthly Recurring Revenue (AMRR) of NZ$589 million, representing growth of 40% on the prior corresponding period. This was driven by a 6% increase in average revenue per user and yet another strong lift in subscriber numbers to just under 1.6 million. Due to the quality and stickiness of the product and its sizeable market opportunity, I believe the company is capable of growing at a similarly strong rate for many years to come. This could make it a great growth share to own.

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia owns shares of Xero. The Motley Fool Australia has recommended Webjet 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. 2019