2 ASX growth shares poised for massive earnings

These two stocks could deliver significant profit growth in the coming years.

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ASX growth shares that are delivering impressive compounding of earnings could be ones to watch.

Investors often like to value businesses based on how much profit they're making, so increasing the profit is a key factor that could drive share prices higher.

Not every business is on course to double profit in the next few years. Some companies are finding the current trading conditions difficult to handle, while others are managing to continue growing like clockwork.

I'm going to talk about two ASX growth shares that are projected to more than double their profit in the next four or five years.

TechnologyOne Ltd (ASX: TNE)

TechnologyOne describes itself as Australia's largest enterprise software company, with locations in six countries. It provides a global software as a service (SaaS) enterprise resource planning solution that "transforms business and makes life simple" for customers. It has more than 1,300 businesses, government agencies, local councils and universities as clients using its software.

The world is becoming more digitised and connected, which is helping a business like TechnologyOne as it wins more customers who utilise more of its offerings.

The ASX growth share continues to deliver solid financial results. In the FY24 half-year result, it reported total revenue growth of 16% to $244.8 million and net profit after tax (NPAT) growth of 16% to $48 million.

Total annual recurring revenue (ARR) rose 21% to $423.6 million, and UK ARR jumped 36% to $28.8 million.

One of the most important elements is that net revenue retention (NRR), which is the net amount of new ARR from existing customers, was 117%. That means existing customers were responsible for significant organic growth.

Over the long term, the economies of scale from its global SaaS ERP solution should see continuing profits before tax margins expand to at least 35%, according to the company.

Analysts at UBS think the business is going to make $118 million of net profit after tax (NPAT) in FY24 and $238 million in FY28, suggesting an increase of 101% over four years.

REA Group Ltd (ASX: REA)

REA Group is a prominent digital property portal business that owns realestate.com.au and realcommercial.com.au. The group also possesses Mortgage Choice, Campaign Agent, PropTrack, and Flatmates.com.au. Additionally, it has ownership of REA India, as well as stakes in Move Inc (a US operator) and PropertyGuru (which owns various Asian property sites).

It recently reported its FY24 result, which demonstrated the power of the company's market share.

REA Group experienced 127.2 million average monthly visits, which is 4.1x more monthly visits than the nearest competitor in the second half.

In FY24, national buy listings increased by 7%, REA Group's total revenue rose 23% to $1.45 billion, and NPAT grew 24% to $461 million. REA India revenue increased by 31% to $103 million.

When the ASX growth share reported its outlook, it said residential buy yield growth in FY25 will be "primarily driven by an average 10% price increase" in its highest penetrated product, Premiere+. The company is expecting profit margins to increase in FY25.

Analysts at UBS think net profit can more than double to $1.04 billion by FY29, which is an exciting prospect.

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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 REA Group and Technology One. The Motley Fool Australia has recommended REA Group and Technology One. 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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