There are some ASX shares that are growing at a very fast pace.
Here are two growing businesses that are rated as a buy by a Motley Fool service:
Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster is an online furniture business that sells furniture and homewares for almost every room in the house, as well as for the garden. It also sells things like wall art.
According to the ASX, it has a market capitalisation of $1.25 billion.
How fast is the company growing? In FY20 it grew revenue by 74% to $176.3 million. The growth accelerated during the year, particularly during the period most affected by COVID-19. FY20 second half revenue grew by 96% and fourth quarter revenue increased by 130%.
The ASX share also boasted of accelerated operational leverage with 483% growth of earnings before interest, tax, depreciation and amortisation (EBITDA) to $8.5 million, with the adjusted EBITDA margin increasing from 2.5% in FY19 to 5.3% in FY20.
Temple & Webster’s CEO Mark Coulter explained the benefits of gaining market share during the most-affected COVID-19 months: “The NAB online sales index suggests our category grew around 57% during the months of April to July, while we grew around 150% for the same period. We believe this is due to the increasing benefits of scale as we get larger. We are forging closer relationships with our suppliers as we become a more significant part of their business which allows us to obtain stock security, better terms and exclusive product ranges. We are also making larger investments in areas such as technology and data, brand awareness and our private label products; and we can produce more content by having more creative resources. In effect, the bigger we get, the better and strong our customer proposition becomes, which is a virtuous cycle.”
FY21 has continued to show fast growth for the ASX share. Financial year to date revenue between 1 July 2020 to 19 October 2020 showed growth of 138%. The first quarter of FY21 saw EBITDA generation of $8.6 million, which was more than the entire FY20 EBITDA. October revenue growth is still more than 100% and contribution margins continue to run ahead of its 15% target.
Temple & Webster’s share price has fallen 23% over the past month. The Motley Fool Share Advisor service currently rates Temple & Webster shares as a buy.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is an electronic donation business that largely serves the US faith sector, namely large and medium US churches.
According to the ASX, Pushpay has a market capitalisation of around $2 billion.
The ASX share recently released its FY21 half-year result which demonstrated growth.
Pushpay reported that its operating revenue increased by 53% to US$85.6 million over the six months to 30 September 2020. The gross profit margin increased from 65% to 68% as a result of a diligent approach to optimising it.
The digital giving business boasted of expanding operating leverage. Whilst revenue increased by 53%, operating expenses only went up by 16%, meaning that total operating expenses as a percentage of operating revenue improved from 50% to 38%. Pushpay expects “significant operating leverage to accrue as operating revenue continues to increase, while growth in total operating expenses remains low.”
Pushpay’s EBITDAF increased by 177% in the HY21 result, with the EBITDAF margin improving from 17% to 31%. FY21 is going better than expected, so Pushpay increased its FY21 guidance again, to a range of US$54 million to US$58 million. Operating cash flow increased by 203%.
Pushpay is currently rated as a buy by the Motley Fool Pro service.
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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 PUSHPAY FPO NZX and Temple & Webster Group Ltd. The Motley Fool Australia has recommended PUSHPAY FPO NZX and Temple & Webster Group 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.
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