Some growth shares have been falling on the ASX in recent weeks. Others have been rising. I always think there’s an opportunity to be found. I’m looking at two of them for May 2021.
Businesses that are growing have a greater chance of producing good returns because of the compounding effect. They may seem expensive this year, but in four or five years from now they might be generating much higher earnings.
I believe these two ASX shares could be long-term growth opportunities:
Cettire Ltd (ASX: CTT)
Luxury goods and online shopping are two long term growth trends, in my opinion. This business combines the two – it’s an e-commerce business that sells hundreds of different luxury brands and many thousands of items.
Cettire is growing incredibly quickly. It revealed gross revenue went up 367% to $25.3 million and sales revenue rose 331% to $18.5 million in the third quarter of FY21. The difference between those two figures is net of allowances and returns from customers. The number of orders rose by 437% to 36,455. Unique website visits went up 325% to 3.6 million. The conversion rate improved 26% to 1.01%. Those are really big growth numbers – it’s not a tiny company.
The ASX share is now expecting to make positive statutory EBITDA (EBITDA explained) in FY21 thanks to stronger-than-expected revenue. That’s why it upgraded its forecasts. It recently linked with leading BNPL players like Klarna.
The fact that Cettire is seeing stronger growth when many online retailers are seeing a slowdown is very encouraging. It has a very scalable business model. I think it’s one to watch.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay continues to be one of the more exciting ideas in my opinion. The digital donation business is seeing exciting levels of double digit volume growth and revenue. But it’s the operating leverage that interests me the most about Pushpay.
As a percentage of operating revenue, total operating expenses improved by 11 percentage points, from 47% to 36% in FY21. Operating revenue grew by 40%, but operating expenses only rose by 9%. As it gets bigger, each new revenue dollar is more profitable for the company than a year ago.
Pushpay said it adopted best-in-class software tools and scalable processes early in its development. Combined with strong financial discipline, these investments will allow significant operating leverage to be achieved. That’s what Pushpay is expecting.
The ASX share is also investing for more growth. It’s going to spend up to US$8 million on expanding in the US Catholic segment which should lead to growth over the subsequent years. Pushpay has set the goal of winning a market share of more than 25% of the Catholic church management system and donor management system market over the next five years.
Pushpay is expecting further operating profit (EBITDAFI) growth in FY22. The CommSec forecast valuation looks reasonable to me at 31 times the estimated earnings for this financial year (FY21).
There are other ASX growth shares that may also be good ideas.
