Top 10 ASX Growth Stocks to Watch in 2024

ASX growth stocks have strong growth potential. These growth companies are often in rapidly expanding industries, such as technology, healthcare, and renewable energy, and they achieve rapid profit growth through innovation, market expansion, or the development of new products. For Australian investors, investing in ASX growth stocks can pursue capital appreciation, especially significant increases in stock prices when the company's growth potential is realised, as well as enjoy the returns from high Return on Equity (ROE).

This article will detail some growth stocks worth paying attention to the ASX market, helping Australian investors find suitable investment opportunities.

What are ASX growth stocks?

ASX growth stocks refer to the stocks of companies listed on the Australian Securities Exchange that have strong growth potential. This growth is typically compared with the S&P/ASX All Ordinaries Index (ASX: XAO) or the S&P/ASX 200 Index (ASX: XJO).

These companies are often in industries that are growing rapidly, such as technology, healthcare, and renewable energy, and they achieve rapid profit growth through innovation, market expansion, or the development of new products.

The characteristics of growth stocks include high expected earnings growth, relatively high price-to-earnings (P/E) ratios and price-to-book (P/B) ratios, and higher price volatility compared to the market average. Investors invest in growth stocks to pursue capital appreciation, especially significant increases in stock prices when the company's growth potential is realised.

Growth companies are more likely to be small, emerging businesses rather than large, established companies. They typically focus on growing their sales and market share, potentially deferring profits to become industry leaders.

Reasons to invest in ASX growth stocks

ASX growth stocks attract attention for their unique growth characteristics. These stocks represent the most dynamic and promising companies in the market, offering not only the potential for high returns but also reflecting investors' confidence in future development. The following are key reasons for investing in ASX growth stocks, which will help you understand why these stocks can be an important part of your investment portfolio.

1. Growth potential

The core appeal of growth stocks lies in their potential for growth. Investors in growth stocks are seeking an increase in the company's future profits, which typically stems from the company's innovative capabilities, market expansion, product line extension, or industry trends. Growth stocks are often found in rapidly growing industries such as technology, healthcare, and renewable energy, with their development driven by technological advancements, demographic changes, and global trends.

2. Return on equity

When investing in growth stocks, an important financial indicator is ROE, which measures a company's ability to generate profits from the funds invested by shareholders. A high ROE (over 10%) indicates that the company is efficient in using its capital and can create more value for shareholders.

3. High valuation and rapid revenue growth

Growth stocks often come with higher price-to-earnings (P/E) ratios and price-to-book (P/B) ratios because the market anticipates that these companies will achieve above-average revenue growth. High valuations reflect investors' optimistic expectations for the company's future growth. Rapid revenue growth can drive up stock prices, bringing capital appreciation to investors.

4. Competitive advantage

Growth stock companies usually possess a competitive edge in their industry, which may be due to their patented technology, brand influence, market position, or cost control capabilities. These competitive advantages enable the company to capture a larger market share and achieve profit growth. Investors in growth stocks with competitive advantages can expect the company to maintain a leading position in the competition, thereby achieving sustained profit growth.

5. Reinvestment returns

Growth stock companies often reinvest profits back into business expansion, research and development, or marketing to drive future growth. This reinvestment can lead to higher rates of return and potentially higher profits in the future. By investing in growth stocks, investors can look forward to the company reinvesting profits to achieve higher returns, thereby increasing the potential for dividend payments or stock price increases.

Top 10 ASX growth stocks to watch

This table shows companies with good financial conditions and great growth potential. Below is a list of top-performing ASX growth stocks selected based on data from November 6, 2024, combined with the latest annual report data. It should be noted that the stock prices of companies selected through the above criteria are not necessarily continuously rising; some individual stocks even have significant volatility and are for reference by Australian investors only.

1. Capicorp Metals Ltd (CMM)

Capicorp Metals Ltd (CMM) is a gold producer located in Western Australia, focusing on exploration, evaluation, development, and production. The company's main projects include the Karlawinda Gold Mine project and the Mt Gibson Gold Mine project. In terms of financial performance, its net profit growth rate reaches 1880.86%, with a return on equity (ROE) of 30.80% and a year-over-year ROE growth rate of 1664.73%, which may reflect significant progress in improving shareholder return on investment.

2. Ramsay Health Care Ltd (RHCPA)

Ramsay Health Care Ltd (RHCPA) is a global healthcare service provider that owns and operates multiple medical institutions, including hospitals, clinics, and nursing homes. Regarding financial performance, Ramsay Health Care Ltd (RHCPA) has a net profit growth rate of 141.15%, a return on equity (ROE) of 19.63%, and a year-over-year ROE growth rate of 166.37%. RHCPA provides high-quality medical services to patients through its extensive network of medical institutions and diversified services, also creating significant value for shareholders.

3. RPMGlobal Holdings Ltd (RUL)

RPMGlobal Holdings Ltd is an Australian-based company specialising in providing software licensing, consulting, implementation, and support services, as well as technical and consulting services to the global mining industry. In terms of financial performance, the net profit growth rate is 134.64%, the return on equity (ROE) is 15.21%, and the year-over-year ROE growth rate is 143.44%, indicating stable growth in the software solutions sector.

4. Collins Foods Ltd (CKF)

Collins Foods Ltd (CKF) is a fast-food chain operator that operates in Australia, Germany, and the Netherlands, with main brands including KFC and Taco Bell. Data shows that Collins Foods Ltd (CKF) has a net profit growth rate of 501.92%, a return on equity (ROE) of 18.92%, and a year-over-year ROE growth rate of 477.49%. These financial indicators suggest that despite facing pandemic challenges, Collins Foods Ltd (CKF) still demonstrates strong growth potential and profitability.

5. McMillan Shakespeare Ltd (MMS)

McMillan Shakespeare Ltd (MMS) is a provider of salary packaging, new vehicle leasing, disability plan management, and fleet management services. According to the table data, McMillan Shakespeare Ltd (MMS) has a net profit growth rate of 158.88%, a return on equity (ROE) of 60.89%, and a year-over-year ROE growth rate of 312.27%. The company's innovation and market leadership in salary packaging and new vehicle leasing services are key factors in its performance growth.

6. APA Group (APA)

APA Group (APA) is Australia's largest natural gas infrastructure company, with an extensive network of transmission pipelines, distribution networks, and storage facilities, and is increasingly investing in renewable energy generation, transmission, and batteries. Data shows that APA Group (APA) has a net profit growth rate of 247.74%, a return on equity (ROE) of 42.61%, and a year-over-year ROE growth rate of 168.39%, indicating the company's continued growth in the energy sector and effective use of shareholder capital.

7. Ramsay Health Care Ltd (RHC)

Ramsay Health Care Ltd (RHC) is a global healthcare service provider with operations across Australia, Europe, and the United Kingdom. The company ranks first in the private hospital systems of Australia, France, and Sweden, and fifth in the United Kingdom, demonstrating its leading position and recognition in the global healthcare industry. In terms of financial performance, the net profit growth rate is 141.15%, the return on equity (ROE) is 19.63%, and the year-over-year ROE growth rate is 166.37%, similar to RHCPA, indicating strong performance in the healthcare sector.

8. Ramelius Resources Ltd (RMS)

Ramelius Resources Ltd (RMS) is a gold exploration and production company. The company's main assets include the Mt Magnet and Edna May production and processing centers located in Western Australia, as well as the "satellite" operations of the Penny, Marda, and Symes gold mines. Additionally, Ramelius is developing the Rebecca/Roe and Cue gold mine projects. The net profit growth rate is 251.82%, the return on equity (ROE) is 19.09%, and the year-over-year ROE growth rate is 157.52%, reflecting the company's growth potential and profitability in the gold market.

9. Region Group (RGN)

Region Group (RGN) is a company that provides engineering and construction services, focusing on owning and managing convenience retail properties. In terms of financial performance, the net profit growth rate is 114.00%, the return on equity (ROE) is 125.36%, and the year-over-year ROE growth rate is 112.73%. Through continuous asset management and strategic acquisitions, Region Group (RGN) is actively expanding its business scale and market share to achieve sustained growth and profitability.

10. Servcorp Ltd (SRV)

Servcorp Ltd (SRV) is an international company specialising in office space solutions, including serviced offices, virtual offices, and meeting rooms. With a market capitalization of 503.19 million, it has a net profit growth rate of 252.74%, a gross margin of 75.79%, and an ROE of 20.42%. The year-over-year ROE growth rate is 256.10%, indicating significant growth and profitability in the office space solutions market.

How to invest in ASX growth stocks?

The Australian Securities Exchange (ASX) offers a variety of growth stocks for investors to choose from. Here are the detailed steps to invest in ASX growth stocks:

Step 1: Open a stock trading account

• You need to register a stock trading account on an online investment platform that provides ASX trading services. For example, the moomoo trading platform can be used for trading Australian stocks, US stocks, or ETFs. This usually requires you to provide some personal information and identification documents and follow the platform's guidelines to complete the account opening process.

Step 2: Fund your account

• After your account is successfully opened, you need to deposit funds into it. Moomoo offers a variety of options for transferring funds, such as ACH transfers and bank wires, from which you can choose the most suitable method based on your needs and convenience.

Step 3: Research and select growth stocks

• You can directly search for the stocks you want to invest in on the moomoo platform or use moomoo's stock screening tools to filter ASX stocks based on specific parameters. For example, you can filter based on market capitalisation, price-to-earnings ratio (P/E), profit margins, and other variables.

Step 4: Choose the type of trade

• On any trading day, you can choose between a market order, limit order, or stop order to buy growth stocks. You can select the most suitable order type based on your trading strategy.

Step 5: Monitor your investments

• After the trade is completed, you need to manage your positions and control risks, including regularly checking the price trends of the stocks and changes in the company's fundamentals, to make adjustments promptly.

Risks and opportunities of ASX growth stocks

In the investment field, ASX growth stocks are highly sought after for their significant growth potential. These stocks represent companies that are expected to achieve rapid growth in the future, often being in fast-growing industries or possessing innovative business models. However, like any investment, growth stocks also come with certain risks. It is crucial to understand the opportunities and risks they may bring before considering investing in these stocks.

Opportunities of ASX growth stocks

1. Capital appreciation potential: Growth stocks are favoured by investors for their expected rapid profit and revenue growth. This growth typically leads to a swift increase in stock prices, providing investors with significant capital appreciation returns.

2. Market opportunities: Successful ASX growth stocks often have broad market opportunities and strong business models. For example, RHCPA Ramsay Health Care Ltd (RHCPA) and Ramsay Health Care Ltd (RHC): With the aging global population and increasing demand for healthcare services, these two healthcare companies may benefit from the continuously growing healthcare market.

3. Policy support: Through technical analysis, stocks with attractive technical trends can be identified, which may have investment potential in the short term. For instance, RPMGlobal may benefit from government support and investment in the resources sector.

Risks of ASX growth stocks

1. Lack of dividends: Companies classified as growth stocks often retain their profits instead of distributing them as dividends. They choose to reinvest these earnings to fuel further expansion. Consequently, investors in such stocks anticipate profits primarily through the increase in the stock's value rather than from receiving dividend payouts.

2. High valuation risk: Growth stocks are often traded at valuations higher than the market average, which means that if the companies fail to meet growth expectations, stock prices may plummet. For example, Altium's price-to-earnings ratio is significantly higher than the average of the ASX 200 index, increasing its risk profile.

3. Market volatility: Growth stocks usually have higher price volatility, which can expose investors to significant capital loss risks. For instance, Altium's stock price experienced a notable decline from late 2021 to mid-2022, although it has since recovered, this volatility can be stressful for investors.

Final thoughts on ASX growth stocks

Investing in ASX growth stocks presents both opportunities and challenges for Australian investors. These stocks are favoured for their expected rapid growth, which can bring significant capital appreciation returns to investors. However, they also come with higher risks, including market volatility, high valuations, and a lack of dividends.

While pursuing the high returns offered by growth stocks, investors need to be vigilant about these risks and conduct thorough research and risk management. By employing strategies such as diversification and long-term holding, it is possible to manage investment risks effectively while pursuing growth potential. Investors need to keep a close eye on market dynamics, conduct in-depth analysis of the growth stocks they are interested in, and aim for steady investment returns.