2 top ASX growth shares that could be worth buying

ELMO Software is one ASX share that’s growing quickly.

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There are some wonderful ASX growth shares that may be worth owning for the long-term.

These businesses are ones that are seeing double digit growth of their revenue and may be able to achieve long-term profit growth.

With that in mind, these are two ASX growth shares that are worth knowing about:

VanEck Video Gaming and Esports ETF (ASX: ESPO)

The is a leading exchange-traded fund (ETF) that provides exposure to the global video gaming and e-sports sector.

There is ongoing double digit growth for this industry as more people play video games and watch it for entertainment.

VanEck – the ETF provider – says that video gaming has achieved 12% average annual growth since 2015. E-sports is growing even faster, with revenue growth of 28% per annum since 2015.

The competitive video gaming audience is expected to reach 646 million people globally in 2023, driven in part by the rising population of digital natives. E-sports is considered the world’s fastest growing sport, with the top tournaments getting crowds similar to World Cup football and the Olympic Games.

E-sports has created new potential revenue streams for the companies involved including game publisher fees, media rights, merchandise, ticket sales and advertising.

Some of the businesses involved includes: Nvidia, Advanced Micro Devices, Tencent, Sea, Netease, Activision Blizzard, Nintendo, Take-Two Interactive Software, Unity Software and Roblox. It has a total of 26 names in the portfolio, but the 10 names I just mentioned make up more than 60% of the overall portfolio.

This ASX growth share comes with an annual management fee of 0.55%. The index that this ETF tracks has seen average returns per annum of 30.2% over the last five years.

ELMO Software Ltd (ASX: ELO)

ELMO Software is a technology business that offers services relating to HR, payroll and expense management.

It’s currently rated as a buy by the broker Morgan Stanley, with a price target of $7.80. That’s a potential upside of 50% over the next year, if the broker is right.

The business is growing revenue very quickly. In the first quarter of FY22, annualised recurring revenue (ARR) grew 61% to $88.5 million, with organic ARR growth of 35%. Revenue increased 52% to $20.7 million.

ELMO says that it has strong momentum with a positive macroeconomic backdrop and with small and medium sized businesses continuing to adopt cloud-based solutions to manage a flexible workforce.

The ASX growth share boasts of a number of positive factors with its software as a service (SaaS) model with a high level of recurring subscription revenue, high customer retention, a high level of organic growth and expansion strategies.

In FY22 it’s aiming to break through $100 million of ARR. Guidance for FY22 ARR is between $105 million to $111 million, which would be year on year growth of 25% to 33%. It’s also expecting to achieve positive earnings before interest, tax, depreciation and amortisation (EBITDA) of between $1 million to $6 million.

The company thinks that there is a $12.8 billion opportunity across small business and mid-market in the UK and ANZ.

Should you invest $1,000 in ELMO Software right now?

Before you consider ELMO Software, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and ELMO Software wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor 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 and has recommended Elmo Software. The Motley Fool Australia owns shares of and has recommended Elmo Software. The Motley Fool Australia has recommended VanEck Vectors ETF Trust - VanEck Vectors Video Gaming and eSports ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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