There are some ASX growth shares that are both promising and seeing very quick growth.
Businesses that are growing quickly may be able to achieve attractive returns for investors thanks to compound growth over several years.
Just because a business is growing doesn’t automatically make it worth owning. However, these could be promising:
Bubs Australia Ltd (ASX: BUB)
Bubs is an infant formula business that specialises in goat milk products for both children and adults. It also has organic grass fed cow milk infant formula, plus a range of vitamin supplements and organic baby food.
It’s currently rated as a buy by the broker Citi, with a price target of $0.58. The broker notes that the evidence of a corporate daigou recovery is positive. Bubs could continue to expand into other areas, such as more countries.
The first quarter of FY22 saw total gross revenue rise to $18.5 million, which was up 96% year on year and 45% quarter on quarter. Both its infant formula and adult goat milk powder saw triple digit year on year growth and more than 60% growth quarter on quarter.
The ASX growth share said there has been a strong rebound in its China-facing business, with 156% revenue growth year on year and 98% quarter on quarter growth. The infant formula daigou sales increased 648% year on year and 265% quarter on quarter.
Management said that the transformation reflects the collaboration with its strategic partners to execute its new integrated channel growth strategy. It has restructured its value chain to deliver higher channel margins and rebalanced the channel inventory to meet stabilised demand.
It’s planning more global growth, with entities and representation now established in New Zealand, China and North America. The first shipment of Aussie Bubs products arrived in the USA during the quarter and Bubs is now an official Walmart vendor, with the first online sales expected to be realised in October 2021.
International gross revenue outside of China was up almost five-fold year on year in the first quarter, and was up 35% quarter on quarter.
Bubs was cashflow positive in the first quarter.
City Chic Collective Ltd (ASX: CCX)
City Chic is a global retailer of clothes for plus-size women. It’s rated as a buy by a few different brokers, including Macquarie Group Ltd (ASX: MQG). The price target is $7.50 with its ongoing growth and expansion into new areas.
The ASX growth share has used an acquisition strategy to grow its business significantly over the last couple of years. It’s also growing organically quickly.
Whilst there are supply chain and labour effects from COVID-19, City Chic has built a “strong” inventory position ahead of Christmas. It doesn’t foresee any material stock shortages.
Online sales continue to grow and profit margins increased in FY21. In the last financial year, sales grew by 32.9% to $258.9 million, whilst underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 50.8% and underlying net profit after tax jumped 80.6% to $24.9 million.
The business continues to look to launch new product lines in some of its markets and City Chic is planning to grow its presence in the EU with the Navabi acquisition.
Macquarie puts the City Chic share price at 31x FY23’s estimated earnings.