There are a number of great ASX shares outside of the ASX 20 that could be ones to consider.
Businesses that are smaller tend to have more growth because they are earlier on with their growth journeys. If they are growing revenue and experiencing rising margins then they could be larger businesses in a few years.
Here are two potentially good options to think about:
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Volpara Health Technologies Ltd (ASX: VHT)
Volpara is a leading business in the breast screening space in the US. It offers a suite of products to help women detect breast cancer earlier. The company is increasingly focusing on risk which will help improve the service and outcomes for patients.
The business has made a few acquisitions in recent years that has increased its market share to around 33% of US women who have a breast screening.
A key part of Volpara's growth plans is that it wants to grow its average revenue per user (ARPU). Its 'Volpara Breast Platform' is an important component of that – it includes all products with multiple integrations to make the suite compelling. A lot of new sales are now for two or three products, representing significantly increased ARPU. The relationship with genetics companies is expected to increase that further.
In FY21 the ARPU was US$1.40. In the first quarter of FY22, that had increased to US$1.42, with the average ARPU being US$1.55. Some sites saw ARPU of up to US$5.87.
The ASX share sees opportunities for significant upselling with its customer base, as well as potential acquisition opportunities. Its customer retention rate remains high.
In the first quarter of FY22, subscription-based receipts were up 38% (or 60% in constant currency) to more than NZ$6.1 million.
Australian Ethical Investment Limited (ASX: AEF)
Australian Ethical is another ASX share that may have a lot of growth potential over the coming years.
It's a fund manager that seeks to provide investors with exposure to businesses that are aligned with their ethics. For example, Australian Ethical looks to invest in businesses that are involved in things like implementing energy efficient technology, generating renewable energy, contributing to a circular economy and achieving medical breakthroughs. However, it avoids businesses involved in activities like fossil fuels.
Australian Ethical is exposed to two growth trends. The first is that there is a growing amount of people who want their investments to be greener. The other trend is that the superannuation pool of money represents a large and growing amount of money that needs to be managed by someone.
The ASX share is seeing its superannuation funds under management (FUM) steadily grow. At the end of June 2021, total FUM had risen by 12% over the quarter and 50% over FY21 to $6.07 billion. Australian Ethical is now managing $3.9 billion of superannuation FUM after seeing net inflows of $610 million over the 2021 financial year.
After including the expected performance fee from the emerging companies fund, Australian Ethical is expecting its underlying profit after tax (UPAT) to be between $10.7 million to $11.2 million. That would represent a mid-point increase of profit of 18% in FY21 compared to FY20.
The Australian Ethical CEO John McMurdo recently said:
We are seeing unprecedented interest and demand for ethical investment as Australians open their eyes to how our products deliver attractive investment returns and make a positive difference in the world. Looking ahead, we expect this growth in ethical investing to accelerate.
