There are some ASX shares out there that are growing very quickly. Businesses that are growing faster than average may be able to achieve higher-than-average shareholder returns.
These two businesses are growing rapidly:
Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster is a large online-only retailer of furniture and homewares. It has over 180,000 products on sale from hundreds of suppliers. The company runs a drop shipping model, where products are sent directly to customers by suppliers which enables faster delivery times and reduces the need to hold inventory, thereby allowing a larger product range. The ASX share also has its own private label range which is sourced from overseas suppliers.
FY20 was a year of accelerating growth. For the full year it grew revenue by 74% to $176.3 million. However, revenue went up 96% in the second half and it grew 130% in the fourth quarter.
Whilst revenue grew 74%, earnings before interest, tax, depreciation and amortisation (EBITDA) went up 483% to $8.5 million. The adjusted EBITDA margin improved from 2.5% in FY19 to 5.3% in FY20.
The company said that its growth, combined with the negative working capital nature of the business model, allowed it to finish with $38.1 million in cash and zero debt, which excludes the $40 million capital raising money.
Temple & Webster's CEO Mark Coulter explained the benefits of gaining market share during the most-affected COVID-19 months: "The NAB online sales index suggests our category grew around 57% during the months of April to July, while we grew around 150% for the same period. We believe this is due to the increasing benefits of scale as we get larger. We are forging closer relationships with our suppliers as we become a more significant part of their business which allows us to obtain stock security, better terms and exclusive product ranges. We are also making larger investments in areas such as technology and data, brand awareness and our private label products; and we can produce more content by having more creative resources. In effect, the bigger we get, the better and strong our customer proposition becomes, which is a virtuous cycle."
In FY21 the company said that its revenue had grown by 138% for the period of 1 July 2020 to 19 October 2020, compared to the prior corresponding period. The first quarter of FY21 saw EBITDA of $8.6 million, which was more than the total of FY20. The contribution margin continued to be higher than 15% and customer satisfaction was still at record levels.
Temple & Webster said it's committed to a high growth strategy to take advantage of the structural shift towards online, capitalising on both organic and inorganic opportunities.
According to Commsec projections, the Temple & Webster share price is currently valued at 35x FY23's estimated earnings.
Kogan.com Ltd (ASX: KGN)
Kogan.com is another ASX share that's growing rapidly. It's an e-commerce platform that sells a wide array of products and services including phones, TVs, appliances, toys, clothes, cars, mobile, internet, insurance and credit cards.
The locked-down period also helped Kogan.com grow rapidly with the shift to online shopping.
FY20 saw gross sales jump 39.3% to $768.9 million, adjusted EBITDA went up 57.6% to $49.7 million and net profit went up 55.9% to $26.8 million. This helped total dividends rise by 46.9% to 21 cents per share. The EBITDA margin has grown from 4.3% in FY17 to 9.3% in FY20.
One of the things that the company is most proud of is its growing Kogan First membership base because members purchase on average much more often than non-members, demonstrating loyalty to the platform.
In the first four months to October 2020, gross sales increased by 99.8%, gross profit went up 131.7% and adjusted EBITDA went up by 268.8%. The company has been making large marketing investments into building the customer base and brand, which it's expecting will have long term benefits for the company.
According to Commsec, the Kogan.com share price is valued at 26x FY23's estimated earnings.
