We’re about to tick over into the next financial year. This could be a useful time to assess which ASX growth shares might be able to make good returns over the next 12 months and the longer-term.
I’ve got my eyes on potential investments that could deliver strong compounding returns, like these two ASX growth shares.
Vaneck Morningstar Wide Moat ETF (ASX: MOAT)
It’s impossible to know what the future will be, but if I had to bet on one ETF to deliver net returns of over 10% per year over the next five years, I’d pick MOAT ETF.
There are two key things I like about this ASX growth share.
The first is the attractive investment style. It only invests in (US-listed) businesses where analysts believe those companies have competitive advantages (such as brand power or network effects) that are predicted to last for at least a decade and probably more than two decades.
So, the portfolio can only own great businesses. The analysts then only add names to the portfolio if they think the share price is trading at a good price compared to what they actually think it’s worth (the ‘fair value’). This means the portfolio only owns strong businesses at good prices which could deliver outperformance.
The second thing I like is that the fees are very reasonable. The annual management fee is 0.49%, and there are no costly outperformance fees that an active fund manager would typically charge.
Since the ETF’s start in June 2015, it has made net returns per year of an average of 15.6%.
Volpara Health Technologies Ltd (ASX: VHT)
I reckon this ASX growth share could be among a leading group of small cap performers over the next five years.
It describes its offering as the following:
“Volpara Health Technologies makes software to save families from cancer… They use Volpara solutions to better understand cancer risk, empower patients in personal care decisions, and guide recommendations about additional imaging, genetic testing, and other interventions.”
Its software can also be used to streamline operations and provide key performance insights that support continuous quality improvement.
The company has built an incredible market share in the US, where 42% of women getting screening mammography have at least one of the company’s products applied on their images and data, which was up from 35.5% at the end of FY22.
It has a very promising ability to grow its average revenue per user (ARPU) if it can get subscribers to utilise more of the modules.
I think there’s strong potential for the business to grow geographically, in places like Australia, Europe and even Asia.
Its gross profit margin is over 90%, so new revenue is very helpful for the financials. In the FY23 result, subscription revenue increased by 35% to NZ$33.6 million.
