This is my #1 ASX growth share to buy right now

I'm backing this ASX healthcare share as an exciting opportunity.

| More on:
A man in a business suit and a tie leans forward with an excited, wide-mouthed expression and holds up one finger to the camera as if indicating the number one.

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

Key points

  • Volpara is an ASX growth share delivering impressive strong double-digit revenue growth
  • It’s expecting further growth to come from multiple areas, including cross-selling software opportunities with existing customers
  • The company is expecting improved profits margins over the next year, which means the business could achieve breakeven

Volpara Health Technologies Ltd (ASX: VHT) shares look very appealing to me. At the current time, the company is the top ASX growth share I'd want in my portfolio.

Volpara describes its business as making software to "save families from cancer". It says healthcare providers use Volpara to "better understand cancer risk, empower patients in personal care decisions, and guide recommendations about additional imaging, genetic testing, and other interventions". It's mainly focused on breast screening.

The ASX healthcare share recently announced its FY23 result which included a number of positives. These seem very promising for the ASX growth share's future. In my view, here are some of the main factors that make it attractive:

Strong revenue growth

Volpara reported its revenue rose by 34% to NZ$35 million in FY23.

The business said all three of its core products (analytics, patient hub/MRS, and risk pathways) experienced "strong revenue growth" of 30%, 33%, and 49% respectively.

The ASX healthcare share has set guidance for FY24 revenue in constant currency terms of between NZ$40 million and NZ$42 million. This would represent a rise of 15% to 20% compared to FY23.

Volpara also saw its average revenue per account (ARPA) grow by 30% in FY23. That represents the annual recurring revenue (ARR) divided by the total number of customers.

The ASX growth share's net revenue retention was 107% for the year. Not only did the business hang onto a very high percentage of its revenue from existing customers during the year, but it managed to add more revenue from those customers.

Market share and cross-selling potential

The ASX healthcare share has estimated one of its software products has been used in more than 40% of mammography/breast screening volumes in the United States.

Volpara noted a "significant" portion of its customers only use one Volpara product.

Management thinks this presents an "excellent opportunity" for the company to cross-sell additional products to its existing customer base.

The company is looking to provide customers with a unified Volpara experience, integrating its products seamlessly.

There are a number of positives for the ASX growth share which could suggest further revenue growth.

Tailwinds could help, according to Volpara. These include mandatory breast density reporting in the US, an ageing population resulting in more women moving into screening age, and an "increasing incidence of breast cancer".

The company is working on expanding in Europe, which could open up a large new market for the ASX healthcare share.

Volpara is also trying to grow its products into new market segments, including insurance and employers, while also launching new products to its existing market including more risk models.

Finally, its revenue could be boosted by expanding in imaging beyond breast screening, and in risk beyond cancer. It's also looking at leveraging artificial intelligence to create "new models for image analysis and interpretation".

Improving profit margin potential

While total revenue rose 34%, gross profit went up 36%, thanks to a 1.3% percentage point improvement to 92.5%. The net loss after tax improved 40% to NZ$9.8 million.

Volpara pointed to its overall operating expenses reaching stability, with large improvements in each of its four major cost categories.

Its high gross profit margin and improving revenue can help deliver improving margins. The ASX healthcare share says its earnings before interest, tax, depreciation and amortisation (EBITDA) in FY24 could be breakeven.

I think the ASX growth share will demonstrate its rapidly improving profit margins over the next couple of years, which could really impress the market. Since the start of the year, the Volpara share price has risen 37%, as we can see on the chart below.

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 positions in and has recommended Volpara Health Technologies. The Motley Fool Australia has positions in and has recommended Volpara Health Technologies. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Opinions

Business women working from home with stock market chart showing per cent change on her laptop screen.
Opinions

1 month until ASX earnings season begins: how I'm preparing

It’s almost reporting time. Here’s what I’m looking at.

Read more »

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Opinions

Potential buys: 2 compelling ASX shares I like

These ASX shares have an exciting future.

Read more »

Smiling man at the wheel of a car.
Opinions

2 ASX auto stocks to buy — and 1 to sell: experts

Analysts have shared fresh insights into 3 ASX auto shares -- and not all of them are in the buy…

Read more »

A male investor sits at his desk pondering at his laptop screen with a piece of paper in his hand.
Opinions

ASX retail share whose 'fundamentals have deteriorated significantly': expert

Christopher Watt from Bell Potter explains his views on this former market darling.

Read more »

A young woman looks at something on her laptop, wondering what will come next.
Opinions

3 soaring ASX 200 large-cap shares that are now overvalued: experts

Two experts say this trio of ASX 200 large-caps have overshot and it's time to take some profits.

Read more »

Man sitting in a plane seat works on his laptop.
Opinions

Expert reveals 2 ASX stocks to sell — and 1 is a recent IPO

Toby Grimm from Baker Young shares his insights.

Read more »

An analyst wearing a dark blue shirt and glasses sits at his computer with his chin resting on his hands as he looks at the CBA share price movement today
Opinions

Expert's verdict on 3 ASX 200 shares (2 have doubled in value and the other has lost 29%)

Two of these stocks were the best performers of their sectors in FY25. Should you buy, hold, or sell?

Read more »

A male investor sits at his desk pondering at his laptop screen with a piece of paper in his hand.
Opinions

Where I'd invest in ASX shares ahead of the likely RBA rate cut

These stocks look too good to miss.

Read more »