September 2021 could be a good time to focus on ASX growth shares. Reporting season has just finished and we’ve had a good look at the results.
The last month has given investors insights into how businesses have performed, as well as the outlook.
A share price can decline and be expensive. Share prices can also rise and be good value.
After seeing their results, share prices and current trading conditions, I think these ASX growth shares might be opportunities:
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is a leading online retailer of thousands of different beauty products from hundreds of different brands.
It reported in FY21 that it saw record revenue, profit and customer numbers. Revenue outperformed guidance, rising 48% to $179.3 million. Active customers rose 39% to 818,000 whilst returning customer growth was 64%.
Profit margins increased, with the gross profit margin increasing by 1.2 percentage points to 33.1% thanks to product margin expansion. The ASX growth share saw EBITDA (EBITDA explained) grow faster than revenue, increasing by 53% to $7.6 million despite the heavy investing for growth.
Adore Beauty is looking to capitalise on the structural shift to online channels. The annual revenue per active customer went up 7% to $219, driven by strong customer retention and increasing average order value. This shows that each customer is becoming more valuable, which should help grow margins over time.
FY22 revenue is up 26% in the year to date. Adore Beauty is going to invest heavily to achieve growth and profit margin expansion will come in a few years after capturing more of the opportunity that awaits.
Bapcor Ltd (ASX: BAP)
The Bapcor share price has dropped 13% over the last month. Lockdowns in Australia’s two most populous cities aren’t helping things. Bapcor has also temporarily halted its network expansion in Asia because of COVID-19 impacts and restrictions.
However, I think that any downturn may be short lived. Asia is a huge potential market for Bapcor and management will want to get on with growing there once the company will benefit from having more outlets that can be open.
The ASX growth share has done a lot on work on its supply chain and efficiencies, which should help the long-term profit margins.
Retail demand may not be as strong in FY22 compared to the prior year (retail revenue grew 26.1% in FY21), but Bapcor can re-invest the profit it made across the business in FY21 to grow its networks of Bursons, Autobarns, truck parts and so on.
I think the longer-term for Bapcor looks good, particularly if it can keep increasing its profit margins. Using the CommSec data, Bapcor is currently priced at 18 times the estimated earnings for the 2023 financial year.
