The two ASX growth shares in this article could be considered as options for potential long-term returns.
Businesses that are growing revenue quickly may also be able to grow profit quicker because they’re rapidly expanding in size. Investors like to focus on profit growth as a key statistic to consider where to value the share price.
These two ASX growth shares are growing quickly and might be worth thinking about:
Airtasker Ltd (ASX: ART)
Airtasker is a leading online marketplace for local services, connecting people and businesses who need work done with people who want to work.
It’s currently rated as a buy by the broker Morgans which has a price target on the business of $1.30. Morgans said the FY21 result was better than expected and the fact it was able to deliver what it has despite lockdowns shows that the business is getting stronger.
Airtasker reported that in FY21 its revenue increased by 38% year on year to $26.6 million, which was ahead of the prospectus forecast of $24.5 million.
The revenue is driven by gross marketplace volume (GMV) of $153.1 million, with growth of 35% year on year. This beat the prospect forecast of $143.7 million. UK marketplace GMV saw 232% year on year on year growth and 93% growth quarter on quarter.
The ASX growth share is looking to expand in the US. It decided to acquire Zaarly to accelerate American growth, which is currently going through an integration process.
The rapid growth of the business is also helping its profitability metrics. It generated underlying pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) of $0.0 million, compared to a loss of $4 million in FY20. Airtasker also made $5.5 million of positive operating cashflow, which was ahead of the prospectus forecast of $0.1 million.
The company said that it’s well positioned to benefit from its capital light model with a gross profit margin of more than 93%.
Baby Bunting Group Ltd (ASX: BBN)
Baby Bunting is a retailer of baby product items like prams, toys and clothes. It’s rated as a buy by the broker Morgan Stanley with a price target of $6.90.
The broker said that the market may not have liked the decline of store sales at the start of FY22 because of COVID-19 effects. Morgan Stanley believes there will be a turnaround with projected positive same store sales growth of 5% in FY22.
In FY21, Baby Bunting reported that its total sales went up 15.6% to $468.4 million. Online sales soared 54.2%, making up almost a fifth of total sales.
Operating leverage and efficiencies saw the ASX growth share’s profit margins go in the right direction. The FY21 gross profit margin increased by 83 points to 37.1% with the cost of doing business (CODB) improving 14 basis points to 27.8%.
It was those improvements that helped pro forma EBITDA climb 29.2% to $43.5 million. Pro forma net profit increased 34.8% to $26 million.
Baby Bunting grew the full year dividend by 34.1% to 14.1 cents.
But, as Morgan Stanley pointed out, lockdowns had caused comparable store sales in the financial year to date (to 12 August 2021) to fall by 6.4%. It’s expecting to open three new stores in the first half of FY22, with a “strong” pipeline of leases committed for the second half of FY22, plus two in New Zealand.
According to Morgan Stanley, the Baby Bunting share price is valued at 23x FY22’s estimated earnings.
The post 2 ASX growth shares that could be buys in September 2021 appeared first on The Motley Fool Australia.
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More reading
- What has happened to the Baby Bunting (ASX:BBN) share price this year?
- Top brokers name 3 ASX shares to buy next week
- Brokers name 3 ASX shares to buy today
- These recent ASX IPOs have just reported for the first time. How did they go?
- 2 top ASX growth shares that could be buys
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker Limited. The Motley Fool Australia has recommended Baby Bunting. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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