TOL - 9th Aug, 2024
Buy Hold Sell: 5 of the fastest-growing stocks on the ASX for FY25
In this episode, Marcus Today's Henry Jennings and Market Matters' James Gerrish analyse some of the market's hottest growth stocks.
Growth stocks were on a tear in 2024, with investors betting big on rate cuts at the end of the year and throughout 2025. The last month, however, has been a slightly different story.
The NASDAQ 100 has dropped more than 13% since hitting a peak on July 10. And while our local tech tracker, the S&P All Tech Index (XTX) held up relatively well throughout July, the index crashed 8% in the first week of August.
While the last week has been painful for many investors, growth stocks are now far cheaper than they were a few weeks ago. So, is now the time to load up on some of these names?
To find out, Livewire's Ally Selby was joined by Marcus Today's Henry Jennings and Market Matters' James Gerrish for their analysis of five of the fastest-growing stocks on the ASX - according to earnings per share (EPS) expectations for FY25.
Happy bargain shopping!
Note: This episode was recorded before Audinate's sell-off and was filmed on Wednesday 31 July 2024. You can watch the video, listen to the podcast or read an edited transcript below.
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Edited Transcript
Ally Selby: Hey, how are you doing? And welcome to Livewire's Buy Hold Sell. I'm Ally Selby and today we're off to the races. We're going to be taking a look at five stocks that are speeding past their peers with exceptional earnings growth expectations for the year ahead. It's the Olympics of the ASX, if you will. But it's not all gold medal winners here. It's not like swimming for Australia. So to find out where the consensus has it wrong, we're joined by Henry Jennings from Marcus Today and James Gerrish from Market Matters.
First up today, we have a crowd favourite. It's Pro Medicus, which is expected to grow its earnings per share by 31% over the year ahead. James, I'm going to start with you. Is it a buy, hold, or sell?
Pro Medicus (ASX: PME)
James Gerrish (BUY): It's hard to do anything but a buy on PME. Hugely successful against their competitors. They're growing revenue, they're growing their margins pretty successfully, and they're moving their business more successfully than others into the cloud and the software-as-a-service approach. So it's a buy. The trends in the business and the trends in the stock are going particularly well.Ally Selby: Pro Medicus shareholders are probably laughing straight to the bank. It's share prices up 106% over the last 12 months. Henry, is it a buy, hold, or sell?
Henry Jennings (BUY): It's a buy. It is not cheap on a PE basis, but they're doing all the right things. Big contract wins in the US. Things are going very well. Good management, good product. Nothing wrong with this one at all, but it is not cheap, so they can't afford to slip up. But for the time being, they're making all the right moves. It's certainly a gold medal-winning performance. This is a buy.Audinate (ASX: AD8)
Note: This episode was filmed before Audinate released its guidance for FY25, sending its share price south.
Ally Selby: Okay, let's move on to Audinate now. It's expected to grow its earnings per share by 53% in FY25. There's a little bit of controversy around that stock. I know you like a little bit of drama, Henry. Can you take us through that drama and then also tell us if it's a buy, hold, or sell?
Henry Jennings (HOLD): It's a hold, only because it's such a low price at the moment. It's been smacked. This is certainly not a gold medal performance. It's probably a bronze medal performance. They dominate in the AV industry in the Dante side of things for the audio, and they're trying to get into the video side of things, and that does seem to be taking its time. And also feedback I've had from the industry, someone emailed me the other day, and they said it's taking time and the share price is reflecting that. There's a lot of expectations in it and it hasn't really delivered as yet. So at these prices, you couldn't sell it because it's already been sold off. So it is a hold from here, but it needs some good news on the video side of things.
Ally Selby: Its share prices lifted 58% over the last 12 months. James, over to you. Is it a buy, hold, or sell?James Gerrish (HOLD): It's a hold, Ally, and we do hold Audinate. We've owned it since 2021, so it's a good stock for us. But Henry's comments around things taking longer and costing more, I think is a valid one. So we are going to be really conscious of the position size we take into this upcoming result. They report in mid-August. We've had a CFO resignation. Rob Goss has stepped down. The company was at pains to explain that, that there was nothing to see there. We had multiple calls with the company around that, but the share prices continued to slide. So to me, I love the longer-term strategy they've got. They've executed it exceptionally well over the last couple of years. I'm nervous about the upcoming results for this one.
Telix Pharmaceuticals (ASX: TLX)
Ally Selby: Next up today we have Telix Pharmaceuticals. It's expected to grow its earnings per share by a whopping 98% in FY25. Over to you, James. Is it a buy, hold, or sell?James Gerrish (SELL): Look, it's a sell for me. Everyone loves it, but I've got to stress, when I started investing 20 years ago, it was stressed to me to know what you do know, and know when you don't understand things. And I think one of the things that I don't really understand is the process around FDA approvals and product approvals and having a really good handle on how that can impact the business over time. So when I think about all the businesses on the ASX, there are a lot of companies out there that I have a good understanding of and I can look into the future with some confidence. I simply don't have that on Telix. It's a shame because it's been a great performer and it's cost us performance not being involved in that. But I won't go out there and invest in something that I don't inherently understand.
Ally Selby: It's been great for my portfolio. It's up 65% over the last 12 months. Henry, for you, is it a buy, hold, or sell?Henry Jennings (BUY): It's a buy. There are a few things in life you can be certain of. Death, taxes, and Telix Pharmaceuticals, I think, is the third one. It has done...
James Gerrish: It's definitely a sell.Henry Jennings: It has done extraordinarily well. In the last day or so, they've had a little bit of a hiccup with an FDA filing for one of their things - but that was more procedural than anything else. They have got a very, very good product and they are earning a lot of revenue as well. And the FDA filing that seems to be a little bit delayed is not going to affect the guidance they put out. So I still like this one. They got sold down a little bit. They did a convertible note, which required a little bit of hedging in place and they did a bit of a placement to do that hedging. So it's taken a little bit of the wind out of the sails, but as I say, there are three things in life you can be certain of - Telix is the third of those.
Paladin Energy (ASX: PDN)
Ally Selby: Next up today we have uranium production company Paladin. It's expected to grow its earnings from nothing to something, so it's going to be a ridiculous amount. Staying with you, Henry, is it a buy, hold, or sell?Henry Jennings (HOLD): It's suffered and I think it's a hold at these levels. We are pregnant with news in August, not so much from Paladin, but from the sector in terms of Cameco and Kazatomprom in Kazakhstan. The problem that Paladin has at the moment is it's complicated what was a simple story. The Namibian Langer Heinrich going back into production was a nice simple story we can understand. Now it's in the middle of taking over a Canadian company as well and it just complicates things and it takes management's eye off the ball. They should be pushing ahead big time in Namibia. I think it's been suffering because of that. It's a hold for me. I don't mind the uranium theme, but I think at the moment there are probably better ways to play it than Paladin until they sort out this acquisition.
Ally Selby: Do you agree, James? Is it a buy, hold, or sell?James Gerrish (BUY): I think it's a buy, Ally, but I can understand why it's been sold down from its recent highs. We own Paladin. It's been a great story for us over the last couple of years, but as I said, I can understand why the stock price is weak. They had an asset that they effectively was bought cheaply or owned cheaply, so it didn't owe them a lot of money. The uranium price ripped. They are selling into a higher price environment. That's a great scenario for making money. They've doubled down on uranium by trying to buy Fission into strength. So if uranium plays out, then this is a greater play on the leveraged nature of that. They'll do better than if they hadn't bought Fission, but it adds an element of risk. They were going to throw off a lot of cash from Langer Heinrich. They've now got about $850 million or so to fund development of Fission. So it changes the dynamics of what they are.
HUB24 (ASX: HUB)
Ally Selby: Last up today we have HUB24, which is expected to grow its earnings per share by 34% over the year ahead. James, last one for you today. Is it a buy, hold, or sell?
James Gerrish (HOLD): It's a hold for us. This one has been a phenomenal performer. The investment platforms have been phenomenal. It's pretty much doubled in the last year. If I think about HUB moving forward, I think about a couple of different things. I think margins will probably go lower and the company's guided as such. When you get bigger balances on the platform, their margins come under pressure. The cash rate coming down is a negative for them. And if I think longer term, I can picture HUB24 as being a hub for all personal finance and moving just out of the investment side into a broader suite of products, which costs money. To me, it's a whole phenomenal success story. But it's hard to buy it after it's doubled.Ally Selby: The share price is up 77% over the last 12 months. Henry, buy, hold, or sell?
Henry Jennings (BUY): I've put a slight buy on it. As James says, it's hard to hold it when it's doubled, but for me, we've got mandated increases coming through in terms of our superannuation contributions that we get from our employers. So that's got inbuilt growth. These platforms, the ones that are doing well, are starting to do really, really, really well. What was it? $84.5 billion under funds under administration or something at the last announcement. So the bigger get bigger and the smaller drop by the wayside. We've seen it with the likes of Preamium, which has struggled somewhat. Whereas, Netwealth and HUB have now become the market leaders and I think that success breeds more success. It's hard when it's doubled, but I think it's still a great-looking chart, and it's a great-looking company. And we're all getting older, unfortunately, and we're all investing more and planning for our retirement better as well. So that's in their favour.Ally Selby: Well, I hope you enjoyed that episode of Buy Hold Sell as much as I did. If you did, why not give it a like? Remember to subscribe to our podcast and YouTube channels. We're adding so much great content just like this every single week.
Which growth stock are you backing in FY25?
Let us know in the comments section below.
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Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.
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Livewire Markets
Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.
Expertise
Livewire Markets
Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.
Expertise
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