December could be a great month to invest in ASX shares with strong growth outlooks. I like the look of businesses with high margins and strong revenue growth.
Businesses that sell software can grow particularly quickly because it doesn’t take a lot of capital or a physical supply chain to expand.
I’d buy these two ASX shares at the current prices.
Volpara Health Technologies Ltd (ASX: VHT)
Volpara is an ASX healthcare share that develops and sells software relating to breast screening and the (risk) analysis of those images.
The business is growing at a very good pace – in the first half of FY24, subscription revenue increased 19% to NZ$19.3 million, helping normalised EBITDA (EBITDA explained) jump 68% to a loss of NZ$1.4 million.
With a gross profit margin of 91.6%, the ASX share is turning most of the new revenue into usable cash for the company to spend on more growth and/or achieve a higher profit margin.
One of the things that excites me the most is that it’s now cashflow positive, so growth from here can help it generate even more cash and that can improve the balance sheet and/or be used for shareholder returns.
In the long-term, I like the company’s add-on growth potential of its small lung cancer division.
Airtasker Ltd (ASX: ART)
Airtasker provides a platform for households and businesses to advertise that they need help with a certain task such as furniture assembly, photography, delivery services and dozens of other categories.
It’s another ASX share with a very strong gross profit margin – it was 94.6% in FY23. Impressively, in FY23 revenue rose by 40.4% to $44.2 million and gross profit rose 42.6% to $41.8 million.
Despite investing significantly for growth in Australia, the UK and the US, the FY23 net cash outflow improved 23.9% and it was operating cashflow positive in the first quarter of FY24 to the tune of $709,000.
Its capital light model suggests to me that if it can be cashflow positive in FY24 it will reassure investors. It had $16.5 million cash and zero debt at 30 June 2023, so it’s in a good place at this stage.
The UK and US markets look very promising – in FY23 UK gross marketplace volume (GMV) rose 35% while US posted tasks rose 158%. They are starting from small numbers, but compounding at that rate can quickly become a meaningful number.
