Growth stocks are expected to grow faster than the overall market. Growth stocks tend to have higher price-to-earnings ratios and lower dividends. Investors in growth stocks are betting on the company’s future success and expect to see capital appreciation over time rather than steady income.
The RBA has been hiking interest rates. These can negatively impact ASX growth stocks. However, the exact impact depends on various factors and can be difficult to predict.
Generally, when interest rates rise, it becomes more expensive for companies to borrow money, slowing down their growth and limiting their ability to reinvest in the business. This can hurt the stock prices of growth companies, causing them to underperform in the market. Additionally, higher interest rates can make fixed-income investments such as bonds more attractive to investors, causing them to move away from riskier growth stocks.
However, the impact of interest rate hikes on a growth stock can vary based on factors such as the state of the economy, the specific company and industry, and the rate of growth expected for the company.
The decline in asset values in response to higher interest rates is understandable. In light of this, we believe the potential for long-term returns is excellent. If you’re an investor trying to diversify your portfolio with growth companies, here are the top 3 best ASX growth stocks to invest in that you may want to consider to buy.
Temple & Webster Group Limited (ASX: TPW)
Temple And Webster Group Limited (ASX TPW) is an ASX-listed e-commerce company that operates an online home and furniture store. It was founded in 2011 and is headquartered in Sydney, Australia. The company offers a range of furniture and homeware products, including indoor and outdoor furniture, bedding and bath, decor, and kitchen and dining products.
Since the beginning of COVID-19, it has expanded greatly. Now that lockdowns have ended, it anticipates reporting healthy year-over-year sales growth again by the end of FY23.
There was little hope that families would indefinitely maintain this high level of housing investment. However, with a strong emphasis on the future, we believe the recent drop marks a fantastic opportunity. Its ultimate objective is to become the world’s most successful home goods shop, both online and off.
It is pouring money into high-growth segments like marketing and IT. Temple & Webster may now provide an augmented reality (AR) solution that allows consumers to see the product in their actual environment before making a purchase decision.
Scale benefits accrue to a firm as it expands, which bodes well for its future financial health.
The TPW share price is trading at $5.71. The share price of Temple & Webster has decreased by 35% during the last year.
TPW is definitely one of the 3 best ASX growth stocks that investors should not ignore in February.
Xero Limited (ASX: XRO)
Xero Limited (ASX: XRO) is an ASX-listed cloud-based accounting software company. The company provides financial management solutions for small and medium-sized businesses, including invoicing, payroll, and expenses. Xero is known for its user-friendly interface and innovative features and has a strong presence in Asia-Pacific.
As a growth stock, Xero has a history of high revenue growth and reinvestment in the business to drive future growth. The company’s stock price can be sensitive to changes in the technology sector and overall market conditions, as well as its financial performance and the competitive landscape.
The increasing number of company subscribers is a positive revenue trend. As a result of higher prices, it is also witnessing a rise in average revenue per user (ARPU).
Compared to where it was a year ago, the XRO share price (ASX XRO) is a far better buy after dropping by almost 30% in the ASX growth stocks chart.
We believe the company will again attract investors’ attention if it generates profits and the average revenue per user (ARPU) increases at a healthy clip.
Its FY22 revenue was $1.1 Billion, increasing 30% YoY. The company incurred a net loss of $9.11 million. Its cash and cash equivalent as of FY22 was $936 million, declining 15.7% YoY. The company is focusing on its growth, that’s why its revenue is increasing, but it reported a loss of $9.11 million. A company focusing on growth starts to make money in the second phase when it completes its expansion policy.
The XRO ASX share price is trading at $76.80 and is down 32% compared to the price a year ago. The current market cap of the company is $11.54 Billion.
Pinnacle Investment Management Group Ltd (ASX: PNI)
Pinnacle Investment Management Group Ltd (ASX: PNI) is an ASX-listed wealth management company. The company provides various financial products and services, including managed funds, superannuation, and advice. Pinnacle is known for its active investment approach and focus on delivering superior investment outcomes for its clients.
If you’re in the funds under management (FUM) industry, you might expect challenges when the market drops. Even though it does not manage any funds directly, it has a financial interest in the success of firms that do so since it assists in their establishment. To free up the fund manager’s time to invest, Pinnacle provides support services, including legal advice, financial management, fund administration, seed funds under management, and more.
When interest rates stop rising and the stock market becomes less daunting, fund inflows might restart since some of the fund managers in whom Pinnacle invests frequently generate outperformance.
Since November 2021, when market instability began, The PNI share price has dropped by more than 40%. Pinnacle has taken a beating, but We believe it will see one of the greatest recoveries over the next year.
The expanding number of managers in the portfolio is also encouraging. Recently, Pinnacle hired a manager specializing in small-cap stocks in Canada.
The Pinnacle share price is trading at $10.40 and is down 10% compared to the price of these ASX growth stocks a year ago. The current market cap of the company is $2.09 Billion.