Here are two ASX growth stocks that I think could be sound long-term investments, to add to your watchlist today. ASX Reporting Season can bring about a lot of fluctuation in share prices for all listed companies so I think now is the time to go on the hunt for new ideas.
Volatility and news flow like this can offer investors an opportunity to invest in a high-quality business that may have suffered a temporary blip in performance. The hard part is trying to figure out whether it’s a temporary or structural change to the core businesses, which should always be at the forefront of investors’ minds.
1. Whispir Ltd (ASX: WSP)
Whispir installs applications into existing workflow solutions to automate business-critical communications across mobile, email, voice, social and the web. It essentially optimises communications between people and organisations at scale. The company went into a trading halt this week to raise capital to fund growth.
The challenges of communication between organisations and staff became prominent during the pandemic due to constant public health announcements. This resulted in a spike in demand for Whispir’s cloud-based products and services.
Despite the improvement in the COVID situation as cases decline across the globe, Whispir’s existing customers still purchased additional products. I think this reflects the importance of effective communication between organisations and people, as well as the stickiness of Whispir’s product.
Whispir’s share price has fallen since its earnings results for the half-year despite recording strong growth.
Whispir continues to gain traction in Asia, offsetting a decline in growth in the North America market. Despite the decline in North America, there are big companies using Whispir like Twilio (NYSE: TWLO), which showcases the high quality of Whispir’s product offering.
It seems Mr Market had higher expectations for growth but the focus for me is Whispir’s product. If Whispir can execute in North America, this could be a sound long-term investment.
2. Nuix Ltd (ASX: NXL)
Nuix equips organisations to process large amounts of unstructured data into a format that can assist clients to investigate, manage, secure, de-risk, and utilise it for a variety of use cases. This company only listed on the ASX in December 2020 and there was a lot of hype.
The hype resulted in Nuix being priced at 24.7x projected earnings of $63.6 million for the IPO.
However, it appears Nuix failed to meet the market’s high growth expectations as the share price continues to drop after releasing its results for the half-year. The company’s revenue declined in this period, but there appears to be a good reason for this.
The company noted more customers are switching from on-premise, perpetual software licencing to consumption-based licencing. As a result, revenue is now more spread out over time.
Even though Nuix recorded lower revenue, it still managed to secure 49 new customers and churn remained low at 4.2% for HY21. I like Nuix’s strong customer base, low customer churn and the long runway for growth in the data space. In saying that, the current price still remains a tad expensive for my liking, so I’ll keep twiddling my fingers on this one. View more ASX growth shares.
