There are some exciting ASX growth shares that I’d be happy to buy for my portfolio next week.
Over multiple years, it’s the power of strong compounding that can make businesses much larger. A business growing revenue by 3% per year isn’t likely to do as well as a business growing revenue by 20% per year (unless it has an astronomical valuation today).
These two ASX growth shares look like they have long-term potential to me:
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is an online retailer of many different beauty products. I think that any business that is benefiting from the trend of digital shopping is one to be interested in.
The company is growing at a very past pace. In the third quarter of FY21, revenue jumped 47% to $39.4 million. This was driven by strong customer retention and re-engagement rates for new customers acquired during 2020.
After several years of this type of growth, it could be a much bigger business and this could come with very helpful scale benefits, leading to rising profit margins. Online fulfilment usually comes with pleasingly low costs.
Adore Beauty says that the beauty and personal care market in Australia is expected to grow at a compound annual growth rate of 26% to 2024.
Redbubble Ltd (ASX: RBL)
Redbubble is another ASX growth share in the e-commerce space. It has a big focus on creative designs on products. It pays artists for their designs which are printed on quality ‘blank’ items like clothing, stickers, masks, phone cases, wall art and so on.
Management recognise that there is a huge opportunity for the company to pursue over the long-term. Over the next few years it’s targeting annual marketplace revenue of $1.25 billion. This is when the business is expecting its EBITDA margin (EBITDA explained) to start climbing as it benefits from operating leverage.
But in the shorter-term, it’s going to invest in a better experience for customers and artists, whilst also improving its supply chain and investing in the third party fulfilment network.
In the third quarter of FY21, it generated marketplace revenue growth of 54% with EBIT growth of 91%. That showed it was already reaching a good scale for profit growth. If it can keep growing revenue at double digits that it could do very well from this valuation (down 48% over the last six months).
However, these aren’t the only ASX shares I’m thinking about right now.
