There are some potential ASX share investments that may be worth considering for their long-term growth potential.
Businesses that are growing their customer base, volume or revenue strongly may be good candidates to consider if they can turn that growth into profit growth over the long-term.
Here are two to consider:
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TechnologyOne Ltd (ASX: TNE)
TechnologyOne, a tech company making software for large businesses and organisations, announced an acquisition this week. It's called Scientia Resource Management, a UK company servicing the higher education sector.
The deal is expected to cost £12 million, including an initial payment of £6 million upfront.
Scientia provides mission critical software for over 150 leading universities across the UK and Australia.
The TechnologyOne CEO Edward Chung said:
The acquisition forms part of our strategic focus to deliver the deepest functionality for higher education and it will accelerate our growth and competitive position in the UK as well as have significant benefits in the Australian higher education market.
Prior to this acquisition, TechnologyOne said that over the long-term it sees continuing strong growth driven by its global software as a service (SaaS) enterprise resource planning (ERP) solution as it grows its penetration with existing customers, adds new customers and expands globally.
Over the next few years, the ASX share's SaaS and continuing business is expected to grow by approximately 15% (or more) per annum. It also sees its total annual recurring revenue (ARR) increasing to $500 million or more by FY26, from the base (at the time) of $233 million.
Morgans currently rates TechnologyOne as a buy.
Tyro Payments Ltd (ASX: TYR)
Tyro is a business that provides payment solutions and banking products for merchants/businesses like cafes and many other places you'd need a payment terminal.
The ASX share is the fifth largest merchant acquiring bank in Australia by the number of terminals in the market, behind the four major banks including Commonwealth Bank of Australia (ASX: CBA). Tyro has also recently expanded into e-commerce.
Despite all of the impacts of COVID-19, Tyro continues to report transaction value growth. In FY21, transaction value increased by 26% to $25.45 billion. In the latest weekly update for the 2022 financial year to date, it has seen transaction value growth of 24%.
FY21 also saw the business swing to a positive result in earnings before interest, tax, depreciation and amortisation (EBITDA) terms to $14.2 million. The net loss after tax also improved by 21.6% to $29.8 million. The normalised net loss before tax surged 57.9% to a loss $10.9 million, an improvement from the loss of $25.9 million last year.
It is exploring multiple growth avenues to offer more to existing merchants and win new merchants. Tyro can also be a continuing beneficiary from the shift from cash payments to digital payments. Management are also on the lookout for bolt-on acquisitions.
It's currently rated as a buy by the broker Morgan Stanley with a price target of $4.60.
