My #1 ASX share idea for May 2022

There are some attractive ASX share options in May 2022. However, one that is catching my attention is Airtasker Ltd (ASX: ART).

For readers who haven’t heard of the business, it provides a platform to bring together people who need work done and individuals or businesses willing to do that work.

There are dozens of categories that people can choose from, including home cleaning, removalists, furniture assembly, handyperson tasks, home and gardening, delivery, accounting, automotive services, swimming lessons, and wedding services. One of the categories that can be chosen is ‘anything’.

I think there is a lot to like about this business. But there are a few key reasons why I like it:

Revenue growth and large addressable market

One of the main things I look for is a business that is growing at a good pace and has plenty more room to grow. It’s the effect of compounding that can enable a business growing quickly to achieve good results over the long term, such as five years or longer.

I think that the quarter for the three months to March 2022 showed off how quickly Airtasker is actually growing. Total revenue rose 21.2% in that quarter to $8.6 million.

UK gross marketplace volume (GMV) went up by 138%. Airtasker’s UK marketplaces continue to scale with both demand (posted tasks) and supply (offers made by active taskers) growing “strongly”.

The US market is also growing very quickly. US ‘posted task’ growth increased 90% quarter on quarter. The ASX share is growing in the targeted cities of Miami, Kansas City, Dallas, and Atlanta. But it’s also building momentum in non-core US cities too. I think this is very promising for the future.

Both the UK and US are much larger markets than Australia.

While inflation (and its flow-on effects) aren’t helping the Airtasker share price and other tech shares, I think that Airtasker can benefit in some ways with growth of the average task value. The FY22 second quarter saw average task value rise by 24% quarter on year to $255.

Gross profit margin

One thing that I really like about Airtasker is that it has a gross profit margin of 93%. This means that 93% of the new revenue (which is growing quickly) is being turned into gross profit.

More gross profit means that the business can invest in business-growing activities such as marketing, product development, salaries, etc.

The gross profit margin should also help its other profit margins, like net profit after tax (NPAT), in time, when the business no longer invests as heavily for growth.

Cashflow

For rapidly-growing ASX shares, it can be tricky to balance spending money on growth and ensuring companies don’t burn through cash. Needing to do capital raising at the wrong time could be very dilutive for shareholders. Look at what happened to ASX travel shares at the start of the COVID-19 pandemic.

Airtasker seems to already have reached the positive cash flow stage of its development.

In the third quarter of FY22, the business generated $1 million of positive operating cash flow. It also had $32.8 million of cash at the bank.

If its gross profit margin stays very high and it keeps growing revenue, then I think the company can comfortably fund its own growth and keep investing in itself.

Airtasker share price

I think the Airtasker share price looks much more attractive after dropping over 50% in 2022 and 65% over the last year.

While some investors may have turned away from Airtasker, I think it has a very promising future if it can keep growing revenue by double-digits in the coming years.

The post My #1 ASX share idea for May 2022 appeared first on The Motley Fool Australia.

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• Buy these great value 2 ASX growth shares: experts
• Why is the Airtasker share price edging higher today?

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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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