The ASX growth share Airtasker Ltd (ASX: ART) has seen its stock price plummet 27% since 22 July, as the chart below shows. Does this mean the company is a buying opportunity?
Airtasker describes itself as "Australia's leading online marketplace for local services", connecting people and businesses that need work with people who want to work. The company aims to "create truly flexible opportunities to work and earn income".
I'm excited by a business with a compelling future and a large growth runway. Airtasker's platform allows users to advertise tasks for almost anything, including delivery, removalists, furniture assembly, photography, coaching, and so on.
In my opinion, Airtasker is one of the most promising ASX small-cap shares to invest in. Here's why.
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Solid revenue growth
The company recently reported its FY24 fourth quarter for the three months ending 30 June 2024. It advised that, despite challenging economic conditions, its FY24 Airtasker platform fee revenue increased 13.9% to $34.1 million. And group revenue lifted 5.6% to $46.6 million. This includes the newly introduced cancellation fee, which saw cancellations reduce by 26.3% year over year.
In the fourth quarter of FY24, Airtasker's UK gross marketplace volume (GMV) rose 34.9% to $3 million, while US GMV grew 9.4% to A$0.8 million.
While its businesses in the United States and the United Kingdom are still small, they are displaying a healthy growth rate and could compound to much larger numbers in the future.
Once the economic picture improves, I think revenue could rise at a faster pace for the ASX growth share.
Excellent profit potential
Profit growth is arguably even more important than revenue growth because investors typically value a company based on how much profit it generates.
The higher a business's profit margins, the more its profit grows when revenue increases. I've already discussed the revenue growth above, but the profit growth also looks appealing.
In the first half of FY24, Airtasker's gross profit margin was above 95%, one of the highest on the ASX. That means nearly all new revenue turns into gross profit, which can then be used for growth expenditures such as marketing or software development.
With ongoing revenue growth, the prospect of profit growth looks likely.
In the third quarter of FY24, the business made positive group earnings before interest, tax, depreciation and amortisation (EBITDA) of $0.6 million (up $1.5 million year over year).
I think Airtasker's EBITDA can jump in FY25 if revenue rises, which looks quite likely given its recent media agreements, which have unlocked an advertising budget of $11 million to grow revenue.
Appealing cash flow model
Airtasker doesn't need to invest a lot of money in property or manufacturing to deliver on its current operations. It's a capital-light model, so growth shouldn't require much capital either.
As the ASX growth share gets bigger, I think its cash flow can soar in Australia. Its platform is already developed, so there isn't too much investing to do from here.
In the FY24 third quarter, the company generated free cash flow of $2.5 million, an improvement of $5.1 million year over year.
That growing cash flow can be used to make acquisitions and/or deliver cash returns to shareholders.
At the end of the fourth quarter, it had $17.8 million of cash and term deposits on its balance sheet. I think it's well-funded for growth.
