2 ASX shares that may be worth researching this weekend

Adore Beauty and Nick Scali are two ASX shares that could be worth researching this weekend.

| More on:
man on phone researching Fintech reports

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The two ASX shares in this article could be good considerations to look at for the long-term.

Both of these businesses had a strong FY21 and want to grow over the coming years.

One of them is an online-only business, whilst the other has only just started tapping into the potential of e-commerce.

At the current share prices, these two companies may be good options:

Nick Scali Limited (ASX: NCK)

Nick Scali is an ASX retail share that sells furniture pieces, although it's planning to offer more products over time.

FY21 was a very strong year for the business. It delivered sales revenue growth of 42.1% to $373 million, whilst underlying net profit after tax (NPAT) doubled to $84.2 million. The earnings before interest and tax (EBIT) margin improved by 940 basis points to 32.7%.

It added three new showrooms over the year, adding one in NSW, one in Victoria and one in New Zealand. In July 2021 the company opened another showroom in New Zealand. Management said that the company will benefit from a full year of trading from these new stores. It now has a network of 61 showrooms with a long-term target of 85.

The ASX share generated online written sales orders for FY21 were $18.3 million compared to $3 million in FY20. The EBIT contribution from the online channel for FY21 was $8.8 million, compared to $0.6 million in the prior year.

Whilst July 2021 written sales orders were down 27% year on year, those orders were up 24% on July 2019, despite the Sydney lockdown. New Zealand written sales orders were up 91% and online growth was 88% in July 2021.

Nick Scali says that the company's future will be primarily driven by the continuing store network growth and increasing online penetration.

Macquarie Group Ltd (ASX: MQG) currently rates Nick Scali as a buy with a price target of $13. It's attracted to the increasing number of stores, good trading and the possibly of bolt-on buys. Macquarie thinks Nick Scali is valued at 15x estimated forward earnings.

Adore Beauty Group Ltd (ASX: ABY)

Adore Beauty is an e-commerce business that sells beauty products through its website. It actually has around 10,800 products from 260 brands.

The ASX share is benefiting from the structural shift to online and ongoing retention of new customers added during COVID-19.

Adore Beauty is pursuing a growth strategy with heavy investing to build on its online market leadership position. Businesses believe that it's well positioned to capture market share in a large and growing market, benefiting from structural tailwinds.

Over the long-term, scale benefits are expected to increase operating leverage and achieve more earnings before interest, tax, depreciation and amortisation (EBITDA) profit margin growth.

In FY21, revenue rose 48% to $179.3 million. Active customers rose 39% to 818,000 and 'returning customer' growth was 64% year on year. Annual revenue per active customer increased 7% to $219, driven by "strong" customer retention and increasing average order value.

Despite the heavy investment, profitability is rising. The gross profit margin increased by 1.2 percentage points to 33.1% whilst EBITDA jumped 53% to $7.6 million.

In the first few weeks of FY22, the ASX share saw revenue growth of 26% on the prior corresponding period.

UBS currently rates Adore Beauty as a buy, with a price target of $6.

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 Adore Beauty Group Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Growth Shares

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
Growth Shares

3 unstoppable ASX shares to buy and hold for the next decade

These shares are going places over the remainder of the decade and beyond.

Read more »

Four piles of coins, each getting higher, with trees on them.
Growth Shares

2 high-growth ASX shares to buy today: brokers

These stocks have a strong growth outlook.

Read more »

Two university students in the library, one in a wheelchair, log in for the first time with the help of a lecturer.
Growth Shares

2 top-quality ASX shares to buy for beginner investors

These stocks could be a great place to start investing.

Read more »

A man in full American NFL playing kit crouches over with his arms across his chest in a defensive stance against a dark background.
Growth Shares

Here's why these two ASX 300 shares are great ones to own

These businesses are two of the fastest-growing stocks in the ASX 300 and are liked by fund manager WAM.

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Growth Shares

3 ASX growth shares you'll wish you bought in June

Analysts think these shares could be destined for big things in the future.

Read more »

Father and daughter with hands on a small plant.
ETFs

Focused on growth? Here are 3 ASX ETFs to consider

Growth investors must ignore the current market noise about tariffs and focus on the long-term horizon.

Read more »

A female broker in a red jacket whispers in the ear of a man who has a surprised look on his face as she explains which two ASX 200 shares should do well in today's volatile climate
Growth Shares

Top brokers name 3 top ASX growth shares to buy now

Why are brokers feeling bullish on these names? Let's find out.

Read more »

Two plants grow in jars filled with coins.
Growth Shares

3 ASX 200 growth stocks up more than 100% in 1 year that could charge higher

It's been a memorable year for shareholders of these 3 companies.

Read more »