There are some exciting ASX growth stocks that I would be happy to buy for my portfolio next week.
Over several years, it is the power of strong capitalization that can make companies many bigger. A business that increases its revenue by 3% per year is not likely to do as well as a business that increases its revenue by 20% per year (unless it has an astronomical valuation today).
These two ASX growth stocks seem to me to have long-term potential:
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is an online retailer of many different beauty products. I think any business that takes advantage of the digital shopping trend needs to be interested in it.
The company is developing at a very old pace. In the third quarter of FY21, revenue jumped 47% to $ 39.4 million. This is explained by high customer retention and re-engagement rates for new customers acquired in 2020.
After several years of this kind of growth, it could turn out to be a much larger business and that could come with some very useful scale advantages leading to increased profit margins. Running online usually comes with a pleasantly low cost.
Adore Beauty says the beauty and personal care market in Australia is expected to grow at a compound annual growth rate of 26% through 2024.
Redbubble Ltd (ASX: RBL)
Redbubble is another part of ASX’s growth in the e-commerce space. It emphasizes the creative designs of the products. It pays artists for their designs which are printed on quality “blank” items such as clothing, stickers, masks, phone cases, wall art, and more.
Management recognizes that there is a huge opportunity for the company to continue for the long term. Over the next few years, he is targeting annual sales of $ 1.25 billion in the market. This is when the company expects its EBITDA margin (EBITDA explained) to start climbing because it benefits from operational leverage.
But in the shorter term, it will invest in a better experience for customers and artists, while improving its supply chain and investing in the third-party distribution network.
In the third quarter of fiscal 21, it generated market revenue growth of 54% with EBIT growth of 91%. This showed that he is already reaching a good scale for profit growth. If he can continue to grow his double-digit income, he could very well take advantage of that valuation (down 48% in the last six months).
However, these aren’t the only ASX stocks I’m thinking about right now.