I'm excited by the potential of certain ASX growth shares that are expanding globally. Businesses that are growing beyond Australia's shores have the potential to unlock larger addressable markets.
Australia is a great country that ranks well on measurements like per-person wealth and income. However, there are fewer than 30 million people in this sunburnt country. Thus, if a company can successfully expand into North America or Europe, it could be a winner.
In this article, I'll discuss the ASX small-cap share, Close The Loop Ltd (ASX: CLG), as a potential market-beating opportunity.
Two of the main things I look for in an ASX growth share are whether it has a compelling future and whether it's trading at an appealing price to buy. I think Close The Loop ticks both boxes.
Exciting potential
The ASX growth share describes its activities as collecting and repurposing products through takeback programs across its resource recovery division. It also provides sustainable packaging products through its packaging division, which enables "greater recoverability and recyclability".
The world wants to be more sustainable over the long term, and Close The Loop is one of the businesses that could enable that change.
One of Close The Loop's key clients is HP, which aims to achieve 75% circularity for its products and packaging by 2030. HP ships around 40 million PCs every year, and there are approximately 300 million HP PCs in the market right now, not including HP printers and other products.
The ASX growth share is the first provider to be appointed as an 'HP platinum global certified renew partner'. 'HP renew solutions' is a global and strategic positioning to "insert HP into the refurbishing and resale of the company's returned products." Close The Loop is pursuing a global product takeback programme as a "strategic priority".
Over the next 12 months, the company expects to establish new facilities in the US, Europe and Middle East to better serve its global clients in those regions.
The company also recently mentioned it is opening a new IT refurbishment in Mexico.
I think the business is capable of delivering ongoing organic growth, synergies with the ISP Tek Services acquisitions and it could potentially make more add-on acquisitions in the future.
In the FY24 first-half result, Close The Loop's revenue rose 76%, the gross profit margin improved by 3.4 percentage points to 36.2% and underlying net profit after tax (NPAT) increased by 164% to $13.25 million.
Attractive valuation of the ASX growth share
How much is this promising ASX growth share valued at?
According to the forecast on Commsec, the Close The Loop share price is valued at 7x FY24's estimated earnings, 6x FY25's estimated earnings and under 6x FY26's estimated earnings.
Considering the exciting appeal of the business, I think the earnings multiple of under 8 times is very appealing.
