These 2 ASX growth shares carry a lot of risk, but I think their upside is huge

The potential rewards may be worth the risks.

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ASX small-cap shares may be able to deliver huge returns if they can execute on their growth plans and grow profitably.

If a small business grows its revenue from $10 million to $20 million, it has doubled in size. That's why, in my mind, it is easier for a small business to double someone's investment compared to an ASX blue-chip share.

However, an ASX growth share won't necessarily grow just because it's small, I think there are a few opportunities that could deliver great returns. Below are two of my favourite ideas right now.

Airtasker Ltd (ASX: ART)

Airtasker owns and operates a platform that connects people who need a task done with people who want to help with the task. There are a large number of categories of tasks that can be posted such as removalists, accounting, home maintenance, gardening, delivery, tutoring, cleaning and many more.

The business is as close to being free cash flow positive as it has ever been, yet the Airtasker share price is down over 40% in 2023 to date.

It's a very capital-light business model, and the ASX growth share has a very strong gross profit margin of more than 90%.

What's most exciting to me about this business is that it's growing rapidly in the UK and the US, which are much larger markets than Australia. In FY23, UK gross marketplace volume (GMV) rose by 35% year over year to £3.7 million, while the US posted tasks jumped by 158% to 64,000.

The company made positive underlying earnings before interest, tax, depreciation and amortisation (EBITDA) in Australia in FY23 and it said it's on track to be free cash flow positive in FY24.

Step One Clothing Ltd (ASX: STP)

Step One makes ethical and sustainably sourced regular underwear and sports underwear. It sells products directly to consumers online.

It has a presence in Australia, the UK and the US. In FY23, it made $43 million of revenue in Australia, $20.3 million of revenue in the UK and $1.9 million of revenue in the US.

In FY23, the ASX growth share grew its pro forma EBITDA by 33.1% to $12 million, with the average order value increasing by 19.3% to $89.49. Pro forma net profit after tax (NPAT) rose 61.7% to $8.6 million. This profit enabled the business to pay a fully franked dividend per share of 5 cents, which translates into a grossed-up dividend yield of 12.3%.

It's currently priced at just 11 times FY23's profit. According to Commsec, it's valued at less than 10 times FY25's estimated earnings, which seems like great value to me for an ASX small-cap share with plenty of growth potential.

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 Airtasker. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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