Tag: Motley Fool

Has the Afterpay Ltd (ASX: APT) share price stalled?

Afterpay shares have been one of the most talked-about shares on the S&P/ASX 200 Index (ASX: XJO) in 2020 so far. That’s what tends to happen when a company makes a whole lot of investors very poor, followed by very rich, all in a relatively small space of time.

Afterpay shares started 2020 out at $30.63. By February, they were at $40 – a 33% increase in just 2 months. But then the coronavirus-induced March share market crash came and Afterpay shares were quickly wiped out, going as low as $8.01 on 23 March, a level not seen since Afterpay’s days of obscurity in 2018.

But today, Afterpay shares are commanding a price tag of $84.84 (at the time of writing) – a 961% return since the lows seen in March. Whilst that might seem like a truly insane return for 7 months, existing Afterpay shareholders might be feeling a bit lost today. That’s because since peaking at $95.97 back in August, the Afterpay share price hasn’t done a whole lot. Investors are used to seeing this company either crash or explode – not sit comfortably at a certain share price. Yet that is what Afterpay shares are seemingly doing right now and indeed have since August. Just look at the pricing graph below for some context:

So what’s going on here? And more importantly, are Afterpay shares a buy today?

Is the Afterpay share price a buy today?

At today’s share price, the market is giving Afterpay an approximate market capitalisation of $24.16 billion. That’s no small thing, considering supermarket giant Coles Group Ltd (ASX: COL) has, on current pricing, a market cap of $23.66 billion.

Interestingly, Coles recently reported that its FY2020 revenues came in at $37.4 billion, with earnings before interest, taxes, depreciation and amortisation (EBITDA) of $1.39 billion and net profits after tax of $951 million.

In contrast, over the same period, Afterpay reported $519 million in revenue, earnings of $44.4 million and a net loss after tax of $22.9 million. What a contrast!

The difference here is that Afterpay’s earnings grew at 73% in FY2020, whereas Coles’ earnings grew at 4.7%.

Still, you as an investor have to decide whether it’s worth buying Afterpay today for a valuation exceeding Coles. If Afterpay can sustain 74% earnings growth for a decade, it’s a bargain today, even at this price. But it would still take around 8 years at a 73% annual growth rate to even match Coles’ earnings.

If this growth stalls, whether due to increased competition or some other reason, then a market cap of more than $24 billion starts to look silly. I think it’s because of a lack of news surrounding Afterpay in recent weeks as well as it’s already arguably-lofty valuation that is keeping the Afterpay share price very neutral at the moment.

Foolish takeaway

At the end of the day, you as an investor have to make this choice. It’s a hard one, but, up until now, no one got rich on Afterpay shares by making the easy choice.

More reading

• ASX 200 finishes 1.3% higher after federal budget
• 2 top ASX 200 blue chip shares worth a spot in your portfolio
• Why I would buy these 3 ASX dividend shares for income today
• Top brokers name 3 ASX shares to buy today
• ASX 200 up 0.4%: Big four banks push higher, Westpac upgraded, ARB impresses

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and COLESGROUP DEF SET. 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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If you have a risk profile that allows you to invest in small cap ASX shares, then you might want to take a look at the ones listed below.

I believe these small cap ASX shares are arguably the best on offer at this side of the market right now. Here’s why I think they could be future stars of the ASX:

Bigtincan Holdings Ltd (ASX: BTH)

The first small cap ASX share to consider buying is Bigtincan. It is a fast-growing sales enablement platform provider. Management notes that the company’s platform pairs functionality with a highly intuitive user interface to provide an advanced content management system, document automation, internal communications, and a fully integrated modern learning management system.

This ultimately helps users deliver a better customer experience and empowers sales and marketing teams to drive improved business results. Demand for its offering continues to grow from blue chip companies and underpinned very strong recurring revenue growth in FY 2020. Over the 12 months, Bigtincan delivered a 53% increase annualised recurring revenue (ARR) to $35.8 million.

ELMO Software Ltd (ASX: ELO)

Another small cap ASX share which I think has a lot of potential is ELMO. It is a cloud-based human resources and payroll software company that provides a unified platform that streamlines a wide range of processes.

As with Bigtincan, ELMO was a positive performer in FY 2020 despite the pandemic. It reported a 19.7% increase in ARR to $55.1 million. FY 2021 looks set to be a similarly strong year, with management expecting to grow its ARR organically by 18% to 27%. Though, it is worth noting that this guidance doesn’t include potential acquisitions. ELMO had a cash balance of almost $140 million at the end of FY 2020. The majority of this is likely to be deployed on value accretive acquisitions in the near term.

Whispir (ASX: WSP)

A final small cap to look at is Whispir. It is a leading workflow communications platform provider which allows organisations to deliver actionable two-way interactions at scale using automated multi-channel communication workflows. 

As with the others, Whispir was a very strong performer in FY 2020. For the 12 months ended 30 June 2020, it posted a 25.5% increase in revenue to $39.1 million and ARR growth of 34% to $42.2 million. This compares to its prospectus forecast of $37.8 million and $42 million, respectively. The good news is that this is still only scratching at the surface of its massive global market opportunity. Management estimates that the workflow communications platform as a service market could be worth US$8 billion per year by 2024.

More reading

• 4 stellar ASX growth shares to buy right now
• Why I would buy Xero (ASX:XRO) and this ASX tech share
• Why these ASX tech shares just hit record highs
• 2 ASX tech shares I’d buy with $10,000 
• 3 small cap ASX shares to put on your watchlist right now

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 and recommends BIGTINCAN FPO, Elmo Software, and Whispir Ltd. The Motley Fool Australia has recommended BIGTINCAN FPO, Elmo Software, and Whispir 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.

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The Carsales.com Ltd (ASX: CAR) share price was on form again on Wednesday and continued to zoom higher.

The online auto listings company’s shares climbed 2% to hit a record high of $21.82.

When the Carsales share price hit that new high, it meant it was up over 28% since the start of the year.

Why is the Carsales share price at a record high?

Investors have been buying the company’s shares this year thanks to its positive performance in FY 2020 despite facing significant headwinds from the COVID-19 pandemic.

For the 12 months ended 30 June 2020, Carsales posted a 1% increase in adjusted revenue to $423 million. And thanks to cost reductions, which supported margin improvements, Carsales delivered adjusted EBITDA growth of 6% to $218 million.

Another big positive was management’s commentary in relation to current trading conditions.

It commented: “We have observed a strong rebound in demand for vehicles across multiple international markets as countries have emerged from lockdown. We have also seen continued migration to digital platforms as well as people’s aversion to taking public transport (deemed unsafe due to COVID-19) have increased the propensity for car ownership, which are positive trends for our business.”

While management stopped short of providing any real guidance for FY 2021, the market appears optimistic that its earnings growth will continue.

What else is supporting the Carsales share price?

Another positive for the company was yesterday’s Federal Budget.

As well as putting more money in consumers’ pockets from tax cuts, the government will allow businesses with turnover of up to $5 billion a year to immediately write-off all assets up to $150,000.

This is great news for businesses that are in need of new vehicles and could underpin solid listing volume growth on the Carsales platform.

Is it too late to invest?

While I think Carsales is a quality company, I feel its shares are looking fully valued after these recent gains. As a result, I would class it as a hold at this point.

For now, I would sooner buy SEEK Limited (ASX: SEK) shares, which I think offer a more compelling risk/reward.

More reading

• Meet the latest ASX small cap stock that’s racing ahead during COVID
• Is the Carsales (ASX:CAR) share price a good buy?
• 3 profitable October ASX 200 trends
• ASX 200 jumps 2.4% higher, numerous shares rise
• New $280 million ASX tech share listing Wednesday

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended carsales.com Limited and SEEK 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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The PYC Therapeutics Ltd (ASX: PYC) share price leapt 9% higher to 18 cents today before slipping to trade at 17 cents by late afternoon. The share price gains came after the company announced that its lead drug was effective in all patient-derived models tested.

PYC Therapeutics shareholders have had much to celebrate this year, with the share price up 192% in 2020. By comparison the All Ordinaries Index (ASX: XAO) is down 8% since 2 January.

Not that the PYC share price was spared the pain during the wider COVID-19 driven market rout earlier this year. That saw the price tumble 29% from 21 February through to 23 March.

Investors lucky enough to buy at that low will be sitting on gains of 250% today.

What does PYC Therapeutics do?

PYC Therapeutics is a drug development company specialising in delivering large drugs directly into patients’ cells. Its cell penetrating peptides (CPPs) are designed to overcome what the company calls ‘the delivery challenge’. Its work involves directly targeting cells ‘undruggable genomes’ for maximum impact. The company uses its CPP platform to develop a range of therapies, with a current focus on inherited retinal diseases.

PYC Therapeutics has a market cap of $504 million.

Why did the PYC share price lift?

It is hoped that PYC’s lead drug program, VP-001, becomes the first disease-modifying therapy for patients with Retinitis Pigmentosa type 11 (RP11). On Monday, the company announced that the critical achievement for its lead program lay in showing the positive impact of the drug on models derived from 5 patients suffering from RP11.

This morning, PYC Therapeutics reported that results from all 5 of its patient derived models had shown the desired effect of its drug on the target gene. The company stated that the results offered “the strongest indication to date that the drug will be effective in all patients with RP11 when the program enters clinical development”.

PYC CEO Rohan Hockings said:

RP11 is a disease of insufficient PRPF3 protein. This result shows VP-001 increases PRPF31 protein in patient derived models. This is a major milestone for the VP-001 program, and further increases our confidence as we approach the clinic. Only in precision medicine can you see such meaningful readouts at this stage of development.

With the PYC share price already up more than 190% in 2020, I think this is one share to keep a close eye on.

More reading

• Here’s why the CV Check (ASX:CV1) share price has soared 30% today
• Why the Tesserent (ASX:TNT) share price has surged 18% today
• Why the Envirosuite (ASX:EVS) share price has rocketed up today
• Why the Image Resources (ASX:IMA) share price is rocketing higher today
• Why the Droneshield (ASX:DRO) share price has rocketed higher

Motley Fool contributor Bernd Struben 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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The S&P/ASX 200 Index (ASX: XJO) finished today strongly, growing by 1.25% to 6,036 points after the release of yesterday’s Australian federal budget.

Scott Phillips shared his thoughts on the budget in this article.

Here are some of the highlights from the ASX today:

Shares react to the budget

Looking at the big ASX banks, the Commonwealth Bank of Australia (ASX: CBA) share price went up more than 2%, the Westpac Banking Corp (ASX: WBC) share price increased by over 2%, the National Australia Bank Ltd (ASX: NAB) share price grew by around 2% and the Australia and New Zealand Banking Group (ASX: ANZ) share price share price rose by more than 2%.

Other large ASX 200 shares also reacted positively, particularly large employers. The Wesfarmers Ltd (ASX: WES) share price went up 2.5%, the Coles Group Limited (ASX: COL) share price rose by 1.6% and the Woolworths Group Ltd (ASX: WOW) share price climbed by 2%.

The aged care operators have fallen today. The Estia Health Care Ltd (ASX: EHE) share price fell by 2%, the Japara Healthcare Ltd (ASX: JHC) share price dropped by 3.7% and the Regis Healthcare Ltd (ASX: REG) share price declined by 1.4%.

Magellan Financial Group Ltd (ASX: MFG)

Magellan announced today that its total funds under management (FUM) increased by $1.2 billion to $102 billion at the end of September 2020.

The fund manager said that in September it experienced net inflows of $1.2 billion which included net retail inflows of $239 million and net institutional inflows of $959 million. This largely appears to have helped its infrastructure equities grow by around $900 million.

In reaction to this update, the Magellan share price went up by more than 2%.

ARB Corporation Limited (ASX: ARB)

The ASX 200 vehicle accessories business provided a pleasing update to the market.

It said that it achieved sales growth of 17.7% for the first quarter of FY21 to 30 September 2020 compared to the previous corresponding period.

Based on its preliminary, unaudited management accounts, ARB’s profit before tax for the quarter was $29.7 million. This guidance excludes non-recurring government benefits of $9.7 million for the quarter.

ARB said that excellent growth was achieved in export markets, while domestic Australian sales growth was moderate and, as expected, OEM sales decreased compared to the same period last year.

The extended lockdown in Melbourne had a negative impact on local sales during the quarter. The level of outstanding orders remains high and work is being done to overcome logistical difficulties and to increase production to reduce the order bank and better service customers.

The ASX 200’s board thinks a substantial amount of the recent growth can be attributed to satisfying pent up demand created during the lockdown period. In addition, ARB’s leadership thinks an increased trend towards local touring in several countries has been helping and government support has provided spending stimulus to people and businesses. Unless something economically drastic happens, export sales are expected to remain strong and the OEM order book is growing.

While the shorter term looks positive for ARB, management said that the future economic environment remains very uncertain and no guidance could be given for the rest of the financial year. The company warned the first quarter’s performance shouldn’t be used as an indicator of the likely full year result as it’s too uncertain to predict.

As government and other COVID-19 related support reduces, the impact on economic activity will be monitored by management closely.

The ARB share price initially went up by more than 5% in early trading, but it finished the day higher by just over 2%.

More reading

• 2 top ASX 200 blue chip shares worth a spot in your portfolio
• Why I would buy these 3 ASX dividend shares for income today
• Top brokers name 3 ASX shares to buy today
• ASX 200 up 0.4%: Big four banks push higher, Westpac upgraded, ARB impresses
• Why a2 Milk, Afterpay, ARB, & SEEK shares are pushing higher today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths Limited. The Motley Fool Australia has recommended ARB 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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If you don’t currently have the funds to build a truly diverse portfolio, then I think exchange traded funds (ETFs) could be just what you need.

This is because through a single investment, ETFs give investors exposure to whole indices, industries, or themes.

There are a growing number of ETFs out there for investors to choose from, but two of my favourites are named below. Here’s why I like them:

iShares Asia 50 ETF (ASX: IAA)

The first ETF to consider buying is the iShares Asia 50 ETF. According to BlackRock, as its name implies, this fund aims to provide investors with the performance of the S&P Asia 50 Index, before fees and expenses. This index is home to the 50 leading companies that are listed in China, Hong Kong, Macau, Singapore, South Korea, and Taiwan. As I’m bullish on the Asian economy over the next decade, I feel it could be a great place to invest some funds.

Included in the fund are companies such as AIA Group, China Mobile, Hyundai, Samsung, Taiwan Semiconductor, and Tencent Holdings. The latter is the owner of the hugely successful WeChat app.

VanEck Vectors S&P/ASX MidCap ETF (ASX: MVE)

If you want to add some exposure to growth shares, then the VanEck Vectors S&P/ASX MidCap ETF could be a great way to do it. This ETF invests in a diversified portfolio of ASX-listed shares with the aim of providing investment returns that closely track those of the S&P/ASX Midcap 50 Index.

VanEck notes that Australian mid cap shares are the sweet spot of the Australian equity universe and represent companies with the spirit of small companies combined with the maturity of large companies. Among its holdings you’ll find the likes of Afterpay Ltd (ASX: APT), Domino’s Pizza Enterprises Ltd (ASX: DMP), Flight Centre Travel Group Ltd (ASX: FLT), and Xero Limited (ASX: XRO). Given the quality on offer in the fund, I believe it has the potential to outperform the benchmark ASX 200 index over the coming years.

More reading

• Is it still safe to invest in China?
• Is the ResMed (ASX:RMD) share price a strong buy today?
• One ASX share every patient investor should own
• 2 top ASX 200 blue chip shares worth a spot in your portfolio
• 3 reasons the Telstra (ASX:TLS) share price is a buy

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 Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited and 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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China is one of the fastest-growing countries in the world, and as such, has proven to be a lucrative market to invest in for many years now. Chinese e-commerce companies like Alibaba Group (NYSE: BABA), JD.com Inc (NASDAQ: JD), Baidu Inc (NASDAQ: BIDU) and Tencent Holdings (OTCMKTS: TCEHY) have exploded in value over just the past 5 years. And with China reportedly leading the world in post-COVID-19 economic recovery, things look set to continue on this path for investors looking to China.

However, China has also increasingly provoked the ire of other countries in recent years, particularly the United States, but also Australia. We won’t go into the political sphere too much here, but I think it’s fairly safe to say that China’s handling of a number of issues, not least of which involving Hong Kong, have been controversial. As have the moves from China to impose export restrictions on a number of Australian industries, such as wine and barley.

All of this matters because we could be seeing a de-coupling of trading norms between China and both Australia and the US. The rhetoric stemming out of the US in 2020, in particular, has been alarming for anyone with investments in China or Chinese companies. It was only last year that the Trump administration was threatening to force Chinese companies like Alibaba and Tencent to de-list from US stock exchanges. And then there’s also the regulatory issues stemming from the oblique American Deposit Receipts (ADR) structures that most Chinese companies list through.

So is China still a safe place to invest?

Is China worth a look in 2020?

I think there are still sufficient reasons to consider investing in top Chinese companies today. This is still a massive growth market, and also one that is relatively uncorrelated to other share markets like the US and Australia. This can be great from a diversification standpoint. However, I do also acknowledge that some of the concerns listed above remain pertinent. We have a highly anticipated US presidential election coming up. If President Trump is reelected, we could see a resumption in the trade wars that dominated Sino-US trade relations prior to 2020. This could well lead to further deterioration between the two countries, which could end up at a point where Chinese shares are indeed ejected from the US capital markets.

Considering all of these factors, I still think investing in China or Chinese companies is a good idea. But I personally would only recommend a small allocation in a portfolio to Chinese companies, to account for the significant risks remaining. I would also stick to the ‘big names’ like Tencent and Alibaba, or otherwise with exchange-traded funds (ETFs) like the BetaShares Asia Technology Tigers ETF (ASX: ASIA) or the VanEck Vectors China New Economy ETF (ASX: CNEW).

More reading

• 2 top ETFs that would be good investments in any portfolio
• Here are 2 of the best ETFs you can buy today
• Where to invest $20,000 into ASX shares immediately
• iCandy (ASX:ICI) share price soaring on partnership with Alibaba
• Where to invest $10,000 into ASX shares right now

Sebastian Bowen owns shares of Baidu. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alibaba Group Holding Ltd. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. 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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In afternoon trade on Wednesday the ResMed Inc. (ASX: RMD) share price is pushing higher with the market.

At the time of writing, the medical device company’s shares are up 1% to $23.83.

Despite this gain, the ResMed share price is down almost 19% from the 52-week high it reached in July.

Is this a buying opportunity?

I think the recent pullback in the ResMed share price is a buying opportunity for long term focused investors.

While its shares are still not cheap, even after this decline, I believe they offer a lot of value for investors that plan to make a buy and hold investment.

This is due to its focus on the lucrative sleep treatment market.

ResMed designs, develops, and manufactures masks to treat sleep disorders such as sleep apnoea. It also has a growing software business which provides solutions that support sufferers of sleep disorders.

Management estimates that there are currently 936 million people with sleep apnoea globally. There are also over 380 million people who suffer from chronic obstructive pulmonary disease (COPD) and more than 340 million people living with asthma.

Due to its industry-leading products and wide distribution network, I believe ResMed can win a growing slice of this market over the next decade.

Management certainly believes this to be the case. It is aiming to improve a total of 250 million lives by 2025. This compares to the 16 million lives it improved in FY 2020 by providing them with a device or complete mask system to help them breathe.

Another part of the company which I’m positive on is its software solutions business. At the end of FY 2020, ResMed’s digital health ecosystem had grown to over 12 million cloud connectable medical devices. It also had ~14 million patients enrolled in the AirView software solution.

This gives ResMed a significant amount of high quality data to perform sophisticated analytics and drive actionable insights.

Foolish Takeaway.

ResMed shares have been market beaters over the last 10 years and I believe the stage is set for them to repeat these heroics over the next decade. This could make the company one of the best buy and hold options on the ASX today.

More reading

• You could become very wealthy by investing $1,000 into these ASX shares
• Potential ASX winners from government’s $1.5bn manufacturing blueprint
• 2 must-buy ASX 200 shares I rate highly
• 3 of the best ASX healthcare shares to buy and hold
• 10 fantastic ASX shares to buy in October

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ResMed Inc. 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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Share prices are edging higher today, with the S&P/ASX 200 Index (ASX: XJO) up 0.9% in afternoon trading.

This comes despite bearish forecasts that Australian shares would follow United States’ share markets lower after President Donald Trump torpedoed ongoing negotiations for the next big US stimulus package. These forecasts saw the ASX 200 fall 0.3% in the first 20 minutes of trading.

But the Morrison government’s own huge stimulatory budget, released last night, clearly trumps Trump’s tweet that US stimulus will have to wait until after ‘he wins’ the presidential election on 3 November.

The ASX shares not making budget related headlines

The budget Treasurer Josh Frydenberg unveiled last night is chock full of personal and business tax breaks, and numerous multi-billion-dollar spending programs targeting the manufacturing and energy sectors, among others.

The aim is to put money back into people’s and companies’ pockets and to create jobs.

Little wonder then that many analysts are citing potential share price gains in energy, financial, infrastructure and retail (particularly online retail) shares.

What you won’t see much of during these early budget analysis days is the long-term gains still offered by beaten down shares in the hospitality and travel space. That’s because no amount of fiscal stimulus is going to fully revitalise these industries until the coronavirus is truly contained.

For investors to reap the potential large gains on offer, they’ll need to be patient.

Air travel gutted

One area that’s been particularly hard hit is air travel.

The International Air Transport Association forecasts that global air traffic in 2020 will be 66% less than it was in 2019. Worse, the Association reported that domestic traffic in Australia was down 91.5% in August.

Ouch.

With those statistics in mind, the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price has actually fared pretty well. After losing 48% in the February and March share market panic, the Sydney Airport share price has rebounded 31% to date.

That still leaves the share price down 32% from the 17 January peak.

And therein lies the longer-term opportunity.

For the Sydney Airport share price to return to its January levels, it will need to gain 47% from today’s price of $5.97 per share.

Now it’s not going to do that before domestic and international travel returns to pre-pandemic levels. In fact, the share price is down 0.3% today despite the broader market gains.

But if you believe, as I do, that COVID will be beaten within the next year and air traffic will return, or exceed, 2019 levels with 2 to 3 years, then Sydney Airport shares today look like an enticing bargain.

More reading

• Leading brokers name 3 ASX shares to buy today
• Sydney Airport (ASX:SYD) share price tipped to ascend 20% from here
• How to generate a passive income of $50,000 with ASX shares
• Beat the RBA rate cuts with these ASX dividend shares
• Advantage Australia — Why Morgan Stanley upgraded ASX shares to overweight

Motley Fool contributor Bernd Struben 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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I think that some of the best ASX shares are within the S&P/ASX 200 Index (ASX: XJO), and they’re worth a spot in your portfolio.

ASX 200 blue chip shares are strong enough to be able to get through difficult periods like COVID-19. But many of the shares outside of the ASX 20 still have very good growth potential.

Here are two of the most promising ideas at the current prices in my opinion:

EML Payments Ltd (ASX: EML)

EML Payments provides payments in different ways. The ASX 200 share be used by clients for rewards, gifts, incentives and to disburse payouts. It has attractive diversification in how to reach the customer.

Before COVID-19 came along, physical gift cards were a big part of the company’s growth prospects. Obviously social distancing, store closures, consumer cautiousness and a rise of online spending has seen the demand for physical gift cards decline.

So I think this company could be a good way to invest on a shift back to normal life if COVID-19 can be eliminated in Australia or an effective vaccine is produced.

Total revenue increased by 25% to $121.6 million and group earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 10% to $32.5 million.

But even if retail shopping doesn’t quite return, I still think EML Payments is a solid ASX 200 share option. The EML Payments share price is down 23% since 10 June 2020 – to me it’s a much better price. That’s despite management saying June and July trading was encouraging.

Also, the business offers things like online gift cards – this could see a significant boost coming up to Christmas, particularly in the northern hemisphere.

A2 Milk Company Ltd (ASX: A2M)

In my opinion, A2 Milk is one of the highest-quality ASX 200 shares. Selloff opportunities are a great time to buy shares of great businesses. Investing should be about multiple year timeframes, not just a single half-year or even 12-month period.

Long-term investors are being presented with an A2 Milk share price which is down 16.5% since 25 September 2020 and down 28% since 30 July 2020.

I understand why investors decided to sell. The local daigou sales channel is being heavily disrupted by COVID-19 impacts with the heavy lockdown in Victoria and the broader limit on international students and tourists caused by Australia’s border closures.

But A2 Milk can make up for this short-term disruption by continuing to build its China-based business and sell more products locally. The ASX 200 share is seeing success from its heavy investment in marketing in China. It’s gaining market share in the important mother and baby store market across China, with distribution increasing to more stores each month.

Things are also going well in the US. In its most recent trading update, the company said that its performance of the liquid milk business in America was strong. In FY20 it saw USA milk revenue growth of 91.2% with distribution expanded to 20,300 stores.

A2 Milk continues to target an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of at least 30% for the longer-term which is an attractive mix of profitability and investing for growth.

Don’t forget, the company is actually still guiding for growth in FY21.  It’s expecting revenue to be between NZ$1.8 billion to NZ$1.9 billion. That would represent growth of between 4% to 10%, up from NZ$1.73 billion in FY20.

But it’s the growth beyond FY21 that makes me think it’s a long-term buy today, particularly with the North American growth. The A2 Milk share price is currently trading at 22x FY23’s estimated earnings.

More reading

• ASX 200 up 0.4%: Big four banks push higher, Westpac upgraded, ARB impresses
• Why a2 Milk, Afterpay, ARB, & SEEK shares are pushing higher today
• Could this ASX growth share be in for a turnaround in 2021?
• Why you may not need ASX REITs for dividends
• How the federal budget will impact on your ASX stock portfolio

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk and Emerchants 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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