I think that ASX small cap growth shares are some of the best ideas to beat the market over the long-term.
Smaller shares have much longer growth runways compared to larger businesses. It's much easier for a small business than a blue chip to double its subscriber base, it store count or however it generates earnings growth.
Most investors don't follow the small cap region of the market, so those businesses usually trade on lower valuations than ones with market capitalisations in the billions of dollars.
Here are two ASX small cap growth shares that you could buy right now:
Pushpay Holdings Ltd (ASX: PPH)
Pushpay provides a donor management system, including donor tools, finance tools and a custom community to the faith sector, non-profit organisations and education providers in the US, Canada, Australia and New Zealand.
The company is experiencing a lot of growth thanks to its focus on large and medium sized US churches, which it's targeting further with an acquisition of Church Community Builder which will improve Pushpay's offering to clients.
In the half-year result to September 2019 the company saw revenue growth of 30% to US$57.4 million, a gross margin improvement from 57% to 65%, the net profit increased 247% to US$6.5 million and its operating cash flow jumped 274% to US$8.9 million.
At this early stage of profitability, Pushpay is able to increase its margins at a fast rate, perhaps quicker than the market is expecting, which is why it could continue to see good share price growth over the next few years.
Propel Funeral Partners Ltd (ASX: PFP)
Propel is the second largest funeral operator in Australia and New Zealand. The company is exposed to some very long-term tailwinds because of the ageing demographics. Death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050.
Funeral businesses generally see quite a consistent level of demand and families will want to celebrate the life (and spend for an enjoyable occasion), so Propel can be fairly certain on how much activity and revenue it will see each year.
FY19 was a solid year with revenue up 17.6%, operating net profit up 8.1% and the dividend up 79.7%. The first quarter of FY20 also had solid numbers with revenue up 19% and operating earnings before interest, tax, depreciation and amortisation (EBITDA) (excluding AASB 16) was up 24.2% with average revenue per funeral growth of more than 2%.
It's currently trading at 20x FY21's estimated earnings with a grossed-up dividend yield of 4.7%.
Foolish takeaway
Both of these small caps have exciting potential over the next few years, particularly at the current prices because of the coronavirus. Pushpay has better growth potential, whereas Propel could be a more reliable share with a nice dividend yield.
