There are some ASX shares that are growing really quickly that could be a bargain to buy today.
I’m not talking about the popular ASX shares like Afterpay Ltd (ASX: APT) or REA Group Limited (ASX: REA).
These two stocks are delivering strong growth and could be good ideas:
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is a business with a pretty different model, it has an e-commerce website with a vision to help women feel more confident and fabulous, giving them personalised products. Its website offers a portfolio of over 260 brands and 10,800 products.
The Adore Beauty share price has fallen by 45% over the last six months. I think this presents investors with a much better opportunity to buy shares.
E-commerce continues to grow, although at a much slower rate than a year ago during the height of COVID-19.
The third quarter showed revenue growth of 47% to $39.4 million. Active customers also grew strongly – up 69% on the prior corresponding period to 687,000.
I think there are a number of promising signs for the ASX share over the longer-term. There has been strong retention and re-engagement rates for new customers acquired during the COVID period. There’s also the Adore Beauty loyalty program launched in March, with sign-ups ahead of expectations.
Adore Beauty now expects to achieve FY21 revenue growth of 43% to 47% year on year, compared to pre-COVID revenue growth of 38.6% in FY19.
The beauty and personal care market is expected to grow at a compound annual growth rate of 26% to 2024. It’s expecting scale benefits, operating leverage and profit margin growth as it grows revenue. That should be an attractive mix.
Adairs Ltd (ASX: ADH)
Adairs is another ASX share that is seeing high levels of e-commerce growth.
The HY21 result saw Adairs online sales growth of 95.2% and Mocka (which is completely online) sales growth of 44.4%.
Adairs continues to open new stores whilst also growing its online capabilities. Adairs has been working on growing its profit margins. The overall gross profit margin rose 500 basis points. This means that Adairs is making a lot more profit for each product it sells.
Whilst group sales increased by 34.8%, underlying EBIT (EBIT explained) surged 166% to $60.2 million.
The new national distribution centre that is being constructed in Melbourne will lead to annual savings of $3.5 million per year once fully operational. It’s a key part of Adairs’ omni supply chain strategy to enable customers to shop how they want to. This new warehouse will support long-term growth across all channels.
Consolidating multiple distribution centre operations into a single national facility will improve stock flow and online fulfilment, increase stock availability, and improve service levels for both customers and stores during peak trading periods, at a lower cost.
Using the forecasts on CommSec, Adairs is valued at just 12 times the estimated earnings for the 2022 financial year with a forecast fully franked dividend yield of 5.8%.
