The top 10 ASX 100 companies in terms of Growth Prospects, according to MarketMeter

In financial markets, growth can be measured all kinds of ways. For example, technology companies are the poster children of the Growth (with a capital G) stock universe. Many have grown their revenue and sales volumes during the last 12 months, even as tech stock prices overall have shrunk in a big way. In Australia, the S&P ASX All Technology index is down more than 30% in 2022 so far, while the broader ASX 200 has returned an (admittedly choppy) -4.75%.

And while a company’s profitability (or lack thereof) can be a make-or-break consideration when deciding whether a stock is worth buying, other fundamental measures are equally important. Take the Kiwi-born but ASX-listed global accounting software firm Xero, which has been unprofitable for most of its 15-plus years of existence.

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But this has been, at least in part, a calculated decision by management, which chose to prioritise other measures of growth. And Xero Limited (ASX: XRO) did edge into the black, for the first time, in the second half of 2017, before reverting to loss-making territory in FY2022.

In the following wire, I outline a raft of companies – including Xero – that were captured in MarketMeter’s second-half 2022 research. It’s one of 20 companies from the ASX 100 and ASX 200 indices among the top scored stocks in terms of their Growth Prospects, as selected by MarketMeter’s 130 institutional data providers. These include leading super funds, asset managers and sell-side financial institutions.

I also gather insights from Charles Lanchester, head of fundamental equities Australia and portfolio manager, BlackRock.

What is MarketMeter?

“Whether you're a value or growth investor, you need to understand the companies beyond just a couple of days or weeks. You need to look at the position of the company in the market and what the sentiment is and how the company is perceived,” says Nicholas Coles, managing director and co-founder at MarketMeter.

“You also need to know the company's market, how it's positioned within that market, and how it is perceived by its customers and stakeholders. We have a deep, high-quality data pool that can help fund managers understand how their stock perceptions differ from their peers, category by category, and by how much.”

The platform enables institutions to score companies from 1-10 on a range of factors. Participants are then able to see how their views compare to those of other professional investors.

Growth Prospects

When MarketMeter talks about the Growth Prospects of companies, as one of 27 factors considered across five broader category definitions, it’s referring to the growth of:

• Earnings per share (EPS) and share price,
• Market share, and
• Position within current and future addressable markets.

In this series, we’ve selected six MarketMeter factors that we think Livewire readers will be most interested to learn more about. My colleague Chris Conway kicked off this series with Sustainability Reporting, which falls under the ESG category group. And Hans Lee followed up with his wire on the Investment Desirability metric, part of the Financial Category.

Top 10 ASX 100 companies in terms of Growth Prospects

These are the ASX 100 companies that fund managers scored highest with regard to the prospective further growth in their earnings per share, market share, and overall market positioning. The list appears in order based on the results of the most recent MarketMeter research.

1. Macquarie Group (ASX: MQG)
2. CSL Limited (ASX: CSL)
3. Fisher & Paykel Healthcare (ASX: FPH)
4. Xero (ASX: XRO)
5. Lendlease Group (ASX: LLC)
6. Aristocrat Leisure Limited (ASX: ALL)
7. Transurban Group (ASX: TCL)
8. ResMed (ASX: RMD)
9. Goodman Group (ASX: GMG)
10. ALS Limited (ASX: ALQ)

Top 10 ASX 101-200 companies in terms of Growth Prospects

These are the ASX 101-200 companies that fund managers scored highest with regard to the prospective further growth in their earnings per share, market share, and overall market positioning. The list appears in order based on the results of the most recent MarketMeter research.

1. Chalice Mining (ASX: CHN)
2. Liontown Resources (ASX: LTR)
3. Lovisa Holdings (ASX: LOV)
4. Bapcor Limited (ASX: BAP)
5. Arena REIT (ASX: ARF)
6. Domain Holdings Australia (ASX: DHG)
7. Corporate Travel Management (ASX: CTD)
8. HUB24 Limited (ASX: HUB)
9. Brainchip Holdings (ASX: BRN)
10. Telix Pharmaceuticals (ASX: TLX).

a blackrock perspective

What do you think of the list generally?

“It’s a very good list,” says BlackRock’s Lanchester, referring to the names within the ASX 100 cohort.

“And it’s unsurprising, to be honest. You don’t see Telstra (ASX: TLS) or the banks in there and it’s also interesting that you don't see any resource companies. It’s the Quality Growth names, basically.”

He also highlights the emphasis on companies that generate most of their revenue from offshore ­– with the exception of toll roads business Transurban.

And without naming names (BlackRock has a strict policy of not discussing individual stocks), Lanchester notes several of the ASX 100 companies identified by the MarketMeter research are in his portfolio.

“We’re running a concentrated portfolio of 27 stocks, with a small and mid-cap bias, so the ASX 100 isn’t necessarily our hunting ground. But that being said, we own half of that list”

He regards the second list, companies from the ASX 200 index, as a more controversial grouping.

What Australian companies that aren’t in the above lists should have made the cut?

Again, while we can’t name them directly, Lanchester mentions two large-cap companies – one in Consumer Staples and the other an Industrial stock.

How important is fundamental growth (including earnings, revenue, and other metrics) to your overall stock selection process?

“We are able to buy companies that are close to making a profit. But we’re not going to own some of the biotech names that are years away from profitability,” Lanchester says.

“We run a style-agnostic portfolio (a mix of Growth, Value and Quality) so we are looking for some of those Growth names if we can buy them at a reasonable price. Though we’re probably not going to have a heap of stocks in there on huge PE multiples, that have that growth discounted many years ahead.”

“All good investors are drawn to growth, to some extent. The whole point of equity investing is to find management teams and boards that are reinvesting capital back into their businesses, not just paying out dividends.”

Lanchester points to the healthcare sector as the home of one of Australia’s best Growth companies of the last 20 years, with compound returns over this period that are “incredible.”

“Stewardship of capital is what you’re looking for. That’s our style of investing – finding those businesses and buying them at the right price.”

Investment Theme

The top 10 ASX 100 companies with moats, according to MarketMeter

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