Motley Fool Australia

3 ASX shares poised for huge growth in FY21

Investor riding a rocket blasting off over a share price chart
Image source: Getty Images

Some ASX shares are poised to deliver huge growth in FY21.

COVID-19 has been difficult for some businesses like Qantas Airways Limited (ASX: QAN). But for other businesses they have seen a strong increase in demand.

It seems like these three ASX shares are on track for a huge FY21:

Nick Scali Limited (ASX: NCK)

You wouldn’t think that a furniture business would be a strong performer during a global pandemic and Australia’s first recession in three decades. But Nick Scali is doing very well. In FY20 its net profit was flat, which was strong considering what was going on.

However, the FY21 outlook seems very promising for the ASX share.

Nick Scali said that trading during July was extremely buoyant with written order sales growing by 70% compared to the prior corresponding period. That followed on from May and June where sales orders were also up over 70%.

About two thirds of Nick Scali’s products are made to order with typical delivery lead times of 9 to 13 weeks. These orders will be delivered in the first quarter and contribute to revenue in FY21.

The ASX share is expecting first half net profit to be up by at least 50% to 60%, assuming no other adverse COVID-19 impacts.

At the current Nick Scali share price, it also offers a trailing grossed-up dividend yield of 8%.

Redbubble Ltd (ASX: RBL)

Online artist marketplace business Redbubble is another ASX share that’s seeing enormous growth.

In FY20 the company saw marketplace revenue grow my 36% with gross profit going up 42% and operating earnings before interest, tax, depreciation and amortisation (EBITDA) rising by 141%.

Growth accelerated in the last quarter of FY20 and it surged further in July 2020. In the first month of FY21 marketplace revenue grew by 132% with similar sale levels in the first two weeks of August. Who knows what the rest of FY21 will bring? But it seems the elevated sales could remain until at least Christmas this year.

The ASX share is going to keep working hard on acquiring, activating and retaining artists, acquiring users and transaction optimisation, understanding customers, building loyalty and the brand, and also improving its product lines and expanding its fulfilment network.

The Redbubble share price still looks decent value to me considering it generated $38 million of free cashflow in FY20.

I think the ASX share can continue to benefit from improving network effects over the coming years as it captures more market share.

Kogan.com Ltd (ASX: KGN)

E-commerce business Kogan.com has done extremely well since the lockdowns in March 2020.

The Kogan.com share price has risen by 410% over the past six months. But there could be more to come if it can continue its growth streak.

In FY20 the company grew gross sales by 39.3%, gross profit went up 39.6%, adjusted EBITDA rose 57.6% to $49.7 million and net profit after tax jumped 55.9% to $26.8 million. It also grew its active customer base by 35.7% to 2.18 million.

Growth was stronger in the FY20 second half with gross sales, gross profit and adjusted EBITDA rising by 62.5%, 68.3% and 74.1% respectively.

That elevated level of growth appears to be continuing (and accelerating). In July 2020 it saw gross sales and gross profit rise 110% and 160% year on year, adjusted EBITDA came in at more than $10 million.

The online e-commerce ASX share recently announced its August 2020 numbers – gross sales grew 117%, gross profit went up 165% and adjusted EBITDA soared 466%.

Kogan.com could be one to watch if its revenue and profit keep going up like this.

At the current Kogan.com share price it’s trading at 47x FY21’s estimated earnings.

Foolish takeaway

Each of these ASX shares seem on course for a solid FY21. Nick Scali keeps surprising, but I’m not sure if its strong numbers will continue over the medium-term. However, the shift to online shopping could continue. I think both Redbubble and Kogan.com could be good buys with a 5-year outlook at today’s share prices.

Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

*Returns as of 6/8/2020

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Related Articles...

Latest posts by Tristan Harrison (see all)