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Buying and holding cheap dividend stocks could provide more than just a generous passive income over the long run. A low interest rate environment may mean that demand for companies with high yields and dividend growth potential increases over the medium term.

Furthermore, the recent market crash means that many income shares currently trade at low prices. This suggests that they could benefit from a likely improving economic outlook over the next decade. As such, now could be the right time to buy a diverse range of dividend shares.

Increasing demand for dividend stocks

Dividend stocks may not currently be particularly popular. The uncertain economic outlook means that many investors are cautious when it comes to investing money in the stock market. They may fear experiencing losses in the short run if risks such as Brexit and the coronavirus pandemic prompt a weakening in investor sentiment.

However, over the long run, the appeal of income shares could increase. Interest rates are currently at a low level and may fail to rise rapidly even if the economic outlook improves. As such, income-seeking investors may be drawn into dividend shares by their relatively high yields at a time when other mainstream assets such as cash and bonds offer relatively unattractive returns. This may help to push the share prices of income stocks higher, thereby providing capital returns for investors alongside their generous yields.

Dividend growth opportunities

Dividend stocks may also offer high long-term returns due to their potential to increase shareholder payouts in the coming years. The current global economic outlook is relatively challenging. However, its track record shows that it has always returned to positive growth following periods of decline. And, with major fiscal and monetary policy stimulus having been enacted in major economies, the outlook for many companies could improve. This could allow them to pay a larger amount in dividends to their shareholders.

Companies that can produce impressive rates of dividend growth may become more appealing to investors. Rising dividends can often highlight improving profitability, as well as management confidence in the company’s outlook. This may act as a buying signal for investors that pushes the share prices of dividend growth stocks higher.

Low current valuations

Another reason to buy dividend stocks today is that they are priced at cheap levels in many cases. Weak investor sentiment towards the stock market means that many high-quality companies currently have yields that are significantly higher than their long-term averages. This suggests that they have wide margins of safety and may offer capital return potential as investor sentiment improves in the coming years.

As such, now could be the right time for an investor to buy and hold dividend shares. Their passive income potential and the prospect of capital returns may lead to impressive total returns as the world economy recovers.

More reading

• 2 exciting small cap ASX shares for your watchlist
• The Webjet (ASX:WEB) share price raced 18% higher last week
• 2 fast-growing ASX tech shares to buy
• These ASX dividend shares offer yields 8 times greater than term deposits
• 1 top ASX share according to this fundie

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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As well as being home to countless blue chip shares, the Australian share market is home to a good number of promising small caps.

Two small cap shares that could be deserving of a spot on your watchlist are listed below. Here’s what you need to know about them:

MNF Group Ltd (ASX: MNF)

MNF Group is a leading provider of Voice over Internet Protocol (VoIP) technology to businesses and consumers. This technology essentially allows telephone calls to be made over the internet. Due to the NBN rollout and the work from home initiative, demand for MNF’s VoIP services has been growing strongly this year. This led to the company recording a 27% increase in recurring revenue to $101.5 million in FY 2020.

Another positive was that it reported a 17% increase in phone numbers on its network to 4.5 million. Management notes that this metric is a key performance indicator for future growth, which bodes well for its performance in FY 2021.

One broker that is confident in the company’s prospects is Morgan Stanley. Late last month its analysts put an overweight rating and $6.30 price target on its shares. This compares to its last close price of $4.96.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is the New Zealand-based healthcare technology company behind the VolparaEnterprise software solution. This product is a cost-effective, mission-critical tool that helps clinics deliver the highest-quality breast imaging services. In addition to this, the company has a growing number of add-on solutions that work with VolparaEnterprise. These include VolparaDensity, VolparaDose, VolparaPressure, VolparaLive, and VolparaPositioning.

Management expects these add-ons to drive material average revenue per user (ARPU) growth in the future. At the end of the second quarter, its ARPU stood at US$1.16. But management is aiming to grow it to US$10 in the future for its full product suite. Together with market share gains and potential geographic expansion, management appears confident that it is well-placed for growth.

One broker that agrees is Morgans. At the end of last month it put an add rating and $1.71 price target on the company’s shares. The Volpara share price ended the week at $1.32.

More reading

• 2 little-known ASX small cap shares rated as buys by fundie
• Volpara (ASX:VHT) share price on watch after Q2 trading update
• These exciting small cap ASX shares could smash the market in the 2020s

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of VOLPARA FPO NZ. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia has recommended VOLPARA FPO NZ. 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.

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One of the best performers on the S&P/ASX 200 Index (ASX: XJO) last week was the Webjet Limited (ASX: WEB) share price.

The online travel agent’s shares raced an incredible 18% higher over the five days to end the week at $4.95.

Why did the Webjet share price race higher last week?

Investors were fighting to get hold of travel shares last week after news broke of a potentially effective COVID-19 vaccine.

On Monday US biotech giant Pfizer released the first set of results from a phase 3 COVID-19 vaccine trial. Those results appear to show the initial evidence of its vaccine’s ability to prevent COVID-19 infections.

According to the update, in the first interim efficacy analysis, the vaccine candidate was found to be more than 90% effective in preventing COVID-19 in participants with no evidence of prior SARS-CoV-2 infection.

This is significantly better than even Pfizer was hoping and would be notably more effective than traditional flu vaccines. According to the US Centers for Disease Control and Prevention, the overall estimated effectiveness of seasonal influenza vaccines is currently 45%.

Pfizer expects to produce up to 50 million vaccine doses globally in 2020 and then up to 1.3 billion doses in 2021.

This has sparked hopes that global travel markets could rebound much quicker than many had expected, which would be great news for Webjet.

Although it has cut its costs materially this year to combat the sizeable decline in ticket volumes, it is still burning through its cash reserves.

The sooner the recovery takes place, the less damage is done to its balance sheet and the stronger the company will be when trading conditions return to normal.

Buoyant travel sector.

Webjet wasn’t the only travel share zooming higher last week. Flight Centre Travel Group Ltd (ASX: FLT) and Sydney Airport Holdings Pty Ltd (ASX: SYD) were also strong performers.

The Sydney Airport share price jumped 13.3% and the Flight Centre share price stormed 11.8% higher.

More reading

• Why Orocobre, Ramsay, Webjet, & Xero shares are dropping lower
• Vaccine hopes cause ASX 200 to rise on Tuesday
• Why the Sydney Airport (ASX:SYD) share price rocketed 24% higher today
• Why Fletcher Building, Santos, Vitalharvest, & Webjet shares are storming higher
• Flight Centre (ASX:FLT) and Webjet (ASX:WEB) shares surge higher on vaccine news

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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.

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There are a lot of growth shares for investors to choose from on the Australian share market.

Two in the tech sector that come highly rated are listed below. Here’s why they have been named as ones to buy:

Afterpay Ltd (ASX: APT)

Afterpay is a leading payments company with a focus on the buy now pay later (BNPL) market. It is also planning to launch savings accounts and cash flow tools through a partnership with Westpac Banking Corp (ASX: WBC) in the near future. It has been growing at an extraordinary rate over the last few  years thanks to the increasing popularity of the BNPL payment method with both consumers and retailers. So much so, during the first quarter of FY 2021, Afterpay recorded underlying sales growth of 115% to $4.1 billion.

One broker that was pleased with this performance was Morgan Stanley. In response to its quarterly update, the broker retained its overweight rating and $115.00 price target. The Afterpay share price is currently fetching $101.85, which means potential upside of approximately 13% based on this price target.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is a fast-growing donor management and community engagement provider to the church market. Thanks to the quality of its platform, its leadership position, and the shift to a cashless society, it has been growing at a very strong rate. In fact, earlier this month the company released its half year results and revealed a 48% increase in total processing volume to US$3.2 billion and a 53% increase in operating revenue to US$85.6 million. And thanks to the further widening of its margins, EBITDAF grew 177% to US$26.7 million.

This caught the eye of analysts at Goldman Sachs, who have put a conviction buy rating and $10.35 price target on the company’s shares. Based on the current Pushpay share price of $7.07, this price target implies potential upside of over 46%.

More reading

• 5 things to watch on the ASX 200 next week
• Why are ASX tech shares all over the place today?
• Why the Aristocrat (ASX:ALL) share price could jump next week
• Top brokers name 3 ASX shares to buy today
• ASX 200 up 1.3%: CBA Q1 update, tech shares rebound, JB Hi-Fi sinks

James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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.

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At present, Commonwealth Bank of Australia (ASX: CBA) is offering term deposits with interest rates of 0.60% per annum on amounts over $50,000 for five years.

This is broadly in line with what you’ll find from the rest of the big four banks right now.

Luckily for income investors, the Australian share market is home to a number of shares that offer yields many times greater than this.

Two ASX dividend shares which provide investors with yields eight times larger are listed below. Here’s what you need to know about them:

Aventus Group (ASX: AVN)

Aventus is the owner and operator of 20 large format retail parks across Australia. It counts major retailers such as ALDI, Bunnings, Officeworks, and The Good Guys as tenants. This is good for two reasons. Not only does this mean it has a high occupancy level, these tenancies give the company’s centres a high weighting towards everyday needs. This has proven to be a real blessing during the pandemic and allowed Aventus to collect the majority of its rent as normal in FY 2020.

Analysts at Goldman Sachs have just reiterated their buy rating and $2.76 price target on its shares. It notes that Aventus has a quality portfolio with opportunities outside the box with its land bank. Based on the latest Aventus share price, the broker estimates it offers a forward 5% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

The 2010s were a difficult decade for this telco giant because of the NBN rollout. The good news for shareholders is that the NBN rollout is close to complete and the headwinds from this are easing notably. So much so, last week the company revealed that it is aiming to return to growth in FY 2022. It is also planning to split into three separate entities, with the aim of taking advantage of potential monetisation opportunities for its infrastructure assets.

In light of this, a number of brokers, such as Goldman Sachs and UBS, are now convinced Telstra will pay a 16 cents per share dividend in FY 2021 and FY 2022. Based on the current Telstra share price, this equates to a fully franked 5.1% dividend yield.

More reading

• Top brokers name 3 ASX shares to sell next week
• Top brokers name 3 ASX shares to buy next week
• AGL Energy (ASX:AGL) ventures into broadband business
• Brokers name 3 ASX shares to buy right now
• Why this broker is calling Telstra (ASX:TLS) shares a buy today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended AVENTUS RE UNIT. 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.

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A leading fund manager, being the Eley Griffiths, has revealed one top ASX share that it thinks is worth owning.

Eley Griffiths is one of the fund managers that is taking part of the Future Generation initiative. This is where two listed investment companies (LICs) have been set up for philanthropic purposes.

Future Generation Investment Company Ltd (ASX: FGX) donates 1% of its net assets each year to youth charities, whilst Future Generation Global Invstmnt Co Ltd (ASX: FGG) donates 1% of its net assets each year to youth mental health charities.

The Future Generation LICs invest in the funds of fund managers, like Eley Griffiths, who work for free so that the donations can be made. There are no management fees or performance fees.

How does Eley Griffiths invest?

It has a number of different funds. One of those funds is the Eley Griffiths Group Emerging Companies Fund. This fund has a consistent record of outperformance of the S&P/ASX Small Ordinaries Accumulation Index.

At 30 September 2020, over the prior year the fund (which invests in ASX shares) had outperformed the index by 15.2%, over the past two years it had outperformed by an average of 12.5% per annum and over the past three years it has outperformed by 12.2% per annum. Since inception in March 2017, it has delivered average returns per annum of 20.5%, outperforming the index by an average of 13.1% per annum.

Eley Griffiths Group says that it has a disciplined investment process and a belief that portfolios are built from bottom-up stock picking whilst being influenced by top-down considerations.

The backbone to the investment philosophy combines a price-for-growth valuation metric with a formal assessment of management and industry structure. The fund manager says this process generates buy and sell signals.

Fund manager’s thoughts on the share market

Eley Griffiths believes the global economy has moved to a recovery phase, commencing in China and spreading outward as consumers normalise in a coronavirus world and businesses begin to invest again. In the short term, passage of the US stimulus bill and the US presidential election may weigh on sentiment.

The fundie also thinks that stock market valuations are full but not excessive and prevailing equity risk premiums continue to reinforce the case for enlarged equity allocations versus that of bonds and fixed interest.

What’s the ASX share idea?

One high conviction holding of Eley Griffiths’ is Reject Shop Ltd (ASX: TRS). The fund manager said: “the ASX share sits at the early stages of a planned multi-year turnaround. New management have a reset balance sheet, strong brand and an operating model awaiting refinement. We have identified several levers where value for shareholders should be unlocked.”

The Reject Shop share price has gone up by 176% since the price bottomed on 27 March 2020 due to COVID-19.

In FY20 the ASX share reported that its FY20 saes grew by 3.4% with comparable store sales growth of 3.5%. In the first half comparable sales rose 0.5% and in the second half it rose 7.1%.

Before AASB 16, FY20 earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 30.1% to $23.7 million. It generated $4.5 million of earnings before interest and tax (EBIT), up from a loss of $23.3 million in FY19, and it made $2.7 million of net profit after tax (NPAT), up from a $16.9 million loss in FY19.

At the end of FY20 it had $92.5 million of cash on the balance sheet and no drawn debt. It generated free cashflow of $61.6 million, up from a $1.9 million outflow in the prior corresponding period.

In FY21 the company will be focused on EBIT growth with cost reductions through business simplification and operational efficiency.

More reading

• Reject Shop (ASX:TRS) share price tumbles but it’s property stocks that should be worried

Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO and Future Generational Global Investment Company Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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Some investors may be avoiding equity markets due to the threat of a second stock market crash. Economic risks are currently relatively high. This could lead to tough trading conditions for many businesses that causes investor sentiment to deteriorate.

Clearly, a market downturn is likely to be painful for all investors in the short run. However, it can also provide buying opportunities for long-term investors. The stock market has a long track record of recovering from even its very worst declines. This could help an investor to generate impressive returns, and may even improve their prospects of retiring early.

The prospect of a second market crash

Determining whether a second market crash will occur is an extremely challenging task. However, risks such as Brexit, the coronavirus pandemic and an unstable economic outlook may mean that there is an elevated chance of challenging conditions for investors. They could contribute to declining profitability and deteriorating investor sentiment in the coming months. This could prompt a return to large stock price falls as investors factor in lower profit guidance over the medium term.

Clearly, there is no guarantee that a further market decline will occur. Current stock prices may already factor in the aforementioned threats to global economic growth. However, the wide range of risks and their potential impact on global GDP growth may mean that investor sentiment is highly changeable at the present time.

Buying cheap shares in a downturn

As mentioned, a market crash would be a painful experience for most investors. They would experience losses on their current holdings. This may dissuade them from entertaining the idea of buying more stocks in order to avoid further losses.

However, a market decline can provide excellent buying opportunities for long-term investors. During a downturn, high-quality companies that are likely to return to strong profit growth in the long run can trade at exceptionally low prices. Weak investor sentiment towards the equity market can produce a wide range of bargain stocks that go on to deliver impressive capital returns.

While there is no guarantee that any share will recover from a stock market crash, a diverse portfolio of shares is relatively likely to produce impressive long-term returns. The track record of indexes such as the S&P 500 Index (SP: .INX) and FTSE 100 Index (FTSE: UKX) shows that they have always experienced sustained bull markets following bear markets. Therefore, owning a broad range of high-quality businesses is likely to allow an investor to take part in a long-term recovery.

Retirement prospects from investing money in shares

Buying shares after a second market crash may appear to be a risky move. In the short run it can mean additional paper losses due to the potential for the stock market to move lower.

However, the stock market’s recovery potential may mean that equities offer a relatively attractive means of building a retirement nest egg. As such, capitalising on low stock prices may prove to be a logical response to any further market downturn.

More reading

• 2 quality ETFs that are popular with ASX investors
• Top brokers name 3 ASX shares to sell next week
• 2 great ASX growth shares to buy
• Top brokers name 3 ASX shares to buy next week
• 5 things to watch on the ASX 200 next week

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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As my colleague wrote recently, exchange traded funds (ETFs) continue to grow in popularity with Australian investors.

After two record-breaking months of inflows in a row, the Australian ETF industry is now worth an estimated $73.8 billion.

Unsurprisingly, with more and more funds piling in, the number of ETFs for investors to choose from has continued to grow.

Among the many options. here are two popular ETFs that investors ought to know about :

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

The BetaShares Asia Technology Tigers ETF gives investors the opportunity to invest in the biggest and brightest technology and ecommerce companies that have their main area of business in Asia. BetaShares notes that through a single trade, this ETF provides diversified exposure to a high-growth sector that is under-represented in the Australian share market.

There are a total of 50 companies included within the ETF. Among these you will find industry giants such as Alibaba, Baidu, JD.com, and Tencent Holdings. The latter is the company behind the hugely popular WeChat app, which has over 1.2 billion users. It is also a substantial shareholder of Afterpay Ltd (ASX: APT).

BetaShares NASDAQ 100 ETF (ASX: NDQ)

Another popular ETF from BetaShares is the BetaShares NASDAQ 100 ETF. As its name implies, this ETF aims to track the performance of the NASDAQ 100. This comprises 100 of the largest non-financial companies listed on Wall Street’s famous exchange.

Among the 100 companies you will find tech giants such as Amazon, Apple, Microsoft, Netflix, and Google parent, Alphabet. In addition, investors will be gaining a slice of non-tech household names including Starbucks, Pepsico, and Lululemon.

BetaShares notes that the ETF has a strong focus on technology, which once again gives diversified exposure to a high-growth potential sector that is under-represented in the Australian share market.

More reading

• Best performing Aussie ETFs right now
• 2 tech ETFs generating big returns
• Zip and Flight Centre were among the most traded shares on the ASX last week
• I would buy the BetaShares NASDAQ 100 ETF (ASX:NDQ) and these ETFs this month
• 2 ETFs to buy next week

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS. 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.

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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of Citi, its analysts have retained their sell rating and $14.20 price target on this infant formula and fresh milk company’s shares. The broker has been looking at the a2-only market in China and notes increasing competition from a local producer. It has concerns that if competitors price their a2-only products at lower levels to appeal to the mass market, it could damage the a2 Milk Company brand. The a2 Milk share price ended the week at $14.45.

Commonwealth Bank of Australia (ASX: CBA)

Analysts at Morgans have downgraded this banking giant’s shares to a reduce rating with a reduced price target of $63.00. The broker made the move following the release of Commonwealth Bank’s first quarter update. It notes that the bank’s net interest margin has been contracting due to the low interest rate environment and lower lending margins. This has led to the broker downgrading its earnings forecasts through to FY 2023. In light of this, it sees no reason to change its rating any time soon. The CBA share price last traded at $73.14.

InvoCare Limited (ASX: IVC)

A note out of the Macquarie equities desk reveals that its analysts have retained their underperform rating but increased the price target on this funerals company’s shares to $9.40. This follows the announcement of the acquisitions of two pet cremation businesses for $49.8 million. Although it sees this as a positive, it has concerns over market share losses by its core business and feels its valuation is stretched. The InvoCare share price was fetching $11.55 on Friday.

More reading

• 2 great ASX growth shares to buy
• 5 things to watch on the ASX 200 next week
• Brokers name 3 ASX shares to buy right now
• After 8 months, ASX 200 shares are finally out of correction territory
• 2 ASX growth shares to buy this month

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia has recommended InvoCare Limited. 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.

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There are some great ASX growth shares that are rated as buys by one of the Motley Fool investment services.

Here are two of those ASX growth share picks:

A2 Milk Company Ltd (ASX: A2M)

A2 Milk is a leading infant formula business with its A2 Platinum range. It also sells things like liquid milk, milk powder and ice cream.

Whilst the company’s headquarters are based in New Zealand, it has sizeable operations in Australia, Asia, the US and Canada.

The expansion into Canada is only a recent addition. It is in an exclusive licensing agreement with Agrifoods Cooperative for the production, distribution, sale and marketing of A2 Milk branded liquid milk for the Canadian market.

The A2 Milk share price has fallen by 28% since 30 July 2020. The ASX growth share recently gave a trading update.

It’s suffering from a variety of COVID-19 issues including the flow-on effect of pantry destocking continuing into FY21 after strong sales in the third quarter of FY20 and lower than anticipated sales to retail daigous in Australia because of reduced tourism from China and international student numbers.

In September it said it also started to see additional disruption to the corporate daigou and reseller channel, particularly because of the stage 4 lockdown in Victoria. That lockdown has now finished.

A2 Milk explained that sales in the daigou channel represent a significant portion of infant formula sales in Australia and New Zealand, so it expects ANZ revenue to be materially below plan for the first half.

However, the ASX growth share said that with strong growth of its Chinese infant milk formula business, management think it’s a single channel logistical issue and A2 Milk believes the daigou impacts are just short-term.

A2 Milk is expecting revenue to fall by 4% to 10% in the first half, but then grow by 4% to 10% overall in FY21.

At the current A2 Milk share price it’s trading at 23x FY23’s estimated earnings according to Commsec.

A2 Milk is currently rated as a buy by the Motley Fool Share Advisor service.

Altium Limited (ASX: ALU)

Altium is an electronic PCB software business. The ASX growth share has grown significantly over the past five years. The Altium share price has risen by 653% since November 2015.

COVID-19 caused disruption to Altium’s FY20 result – it impacted its revenue and its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) margin. Altium had to reduce prices and extend payment terms to continue to bring in new clients during the final quarter of FY20. That’s why normalised earnings per share (EPS) only went up 5% in FY20.

However, the company pointed to the fact that it successfully launched Altium 365, its new cloud platform, and it’s pivoting the business towards this product to ensure its success.

Altium said that Altium 365 was causing excitement and gaining strong early adoption. Altium CEO Mr Aram Mirkazemi said: “This is most heartening and an early validation of our vision and strategy for this new digital platform to transform the electronics industry.”

The ASX growth share is still aiming for 100,000 subscribers by 2025 to achieve market leadership, where it has just passed the half-way mark. However, it may take another six to twelve months to reach its 2025 goal of US$500 million in revenue.

According to Commsec numbers, at the current Altium share price, it’s trading at 47x FY23’s estimated earnings.

Altium is still rated as a buy by the Motley Fool Pro service.

More reading

• 5 things to watch on the ASX 200 next week
• 3 fantastic ASX shares to buy next week
• 2 ASX growth shares to buy this month
• Why are ASX tech shares all over the place today?
• 2 ASX 50 shares to buy today

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia owns shares of and has recommended A2 Milk. 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.

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