There are some great ASX growth shares out there that could be worth considering for a spot in your portfolio.
Here are two compelling businesses that are growing really quickly:
Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster is a business that sells a wide array of furniture and homewares. Indeed, it has over 180,000 products on sale from hundreds of suppliers. It operates a drop-shipping model, where products are sent directly to customers by suppliers which helps with faster delivery times and reduces the need to hold inventory, allowing a larger product range. Temple & Webster also has a private label range which is sourced from overseas suppliers.
The COVID-19 lockdown period caused a lot of growth for online retailers. But the ASX growth share increased its market share during this time – while the category grew by 57% during the months of April to July, Temple & Webster grew by 150% according to the company.
As Temple & Webster grows in size, it's becoming a larger part of suppliers' revenue which allows the ASX share to get better stock security, better terms and exclusive product ranges. Getting bigger also means it can invest more in technology, data, marketing and private label products. The company boasted that the bigger it gets, the stronger its customer proposition becomes, which is a helpful cycle.
In FY20 it grew full year revenue by 74% to $176.3 million and second half revenue rose 96%. Accelerated operational leverage helped grow earnings before interest, tax, depreciation and amortisation (EBITDA) by 483% compared to FY19 to $8.5 million, with the adjusted EBITDA margin growing from 2.5% to 5.3%.
It finished FY20 with $38.1 million of cash and no debt, which excludes the proceeds from its $40 million capital raising which was conducted in early FY21.
The ASX growth share continued expanding into FY21 with revenue for the period of 1 July 2020 to 19 October 2020 up 138% compared to the prior corresponding period. FY21 first quarter EBITDA generated was $8.6 million, which was more than the whole of FY20. October revenue growth was still more than 100% and the contribution margin was ahead of its 15% target.
According to Commsec projections, the Temple & Webster share price is valued at 36x FY22's estimated earnings.
Kogan.com Ltd (ASX: KGN)
Kogan.com is another e-commerce ASX growth share. It sells a wide array of products and services such as phones, computers, furniture, insurance, credit cards and superannuation.
One part of the business is its membership program called Kogan First. Mr Kogan, the founder of the company, has spoken about the benefit to the company of its growing number of people using its loyalty scheme: "The Kogan First community of members grew exceptionally during the second half, and importantly these loyal members on average purchase and save much more often than non-members, demonstrating loyalty to the platform, and also demonstrating the significant savings and other benefits available through the loyalty program."
The company's margins have grown over the last few years. In FY17 the EBITDA margin was 4.3% and it had more than doubled to 9.3% by FY20.
Growth in FY21 to the end of October 2020 remained elevated, with gross sales up around 100%, gross profit was up 131.7% and adjusted EBITDA had grown by 268.8%.
Kogan.com is expanding in New Zealand with an acquisition called Mighty Ape, which is also a fast-growing e-retailer. It specialises in gaming, toys and other entertainment categories. The ASX growth share believes it can build on Mighty Ape's offering and provide the infrastructure to grow further.
In FY21 Mighty Ape is forecast to generate revenue of $137.7 million, gross profit of $45.7 million and EBITDA of $14.3 million, which represents growth of 43.7%, 58.1% and 254.1% respectively.
According to Commsec projections, the Kogan.com share price is valued at 26x FY23's estimated earnings.
