Key points
- Experts think that both BWX and Bubs have strong return potential in 2022
- Natural beauty stock BWX has several attractive brands that have impressive international growth potential
- Bubs, the goat infant formula business, is seeing daigou demand return and international sales soar
This year could be a strong year for some of the ASX shares that are growing strongly but have seen share price declines.
Companies that are growing revenue at a fast pace give themselves a good chance of growing profit margins due to operating leverage and delivering net profit growth over the longer-term.
Lower share prices could mean better valuations. Analysts have rated the following two ASX shares as opportunities, which are growing globally:
BWX Ltd (ASX: BWX)
BWX is one of the world leaders when it comes to natural beauty products. It now has a number of brands that offer different products serving various markets including: Sukin, Andalou Naturals, USPA, Mineral Fusion and Go-To Skincare. BWX also owns two e-commerce platforms – Nourished Life and Flora & Fauna.
The BWX share price recently took a dive after announcing that the current managing director and CEO Dave Fenlon would be stepping down from being the leader. Chief operating officer (COO) Rory Gration will become the new boss.
UBS thinks that BWX is a buy, with a price target of $5.50. That's a potential upside this year of almost 50% for the ASX share, if the broker is right. The broker's confidence in the business is partly shown by the ability of the company to win over big retailers like Chemist Warehouse and Walmart.
BWX is excited by the potential of Go-To Skincare after buying 50.1% of it for around $89 million. On FY21 pro forma numbers, including around $3 million of potential synergies, it adds at least 10% to earnings per share (EPS).
Go-To founder Zoe Foster Blake will remain as a strategic shareholder, chief creative officer and board director.
On UBS predictions, the BWX share price is valued at 19x FY23's estimated earnings.
Bubs Australia Ltd (ASX: BUB)
Bubs is a leading infant formula and nutrition business. It has a leading goat infant formula brand as well as adult goat milk dairy products. Plus, it has an organic, grass-fed cow infant formula range, and a vitamins and minerals range.
The Bubs share price has fallen around 35% from 28 January 2021.
This business is seeing a strong recovery with Chinese demand and daigou customers, whilst non-China international growth continues to power ahead.
Investors will get an insight into the FY22 second quarter and first half performance soon enough, but the first quarter showed a lot of growth. Total gross revenue grew 96% to $18.5 million year on year and 45% quarter on quarter.
The ASX share was the fastest growing infant formula manufacturer across Australian domestic grocery and pharmacy retailers with Bubs infant formula scan sales up 35% in the last quarter. Daigou sales increased 648% year on year and 265% quarter on quarter.
International (excluding China) revenue rose 489% year on year, contributing 24% of quarterly sales. Export sales of Bubs infant formula sales to markets outside of China soared 154%.
It is also utilising its manufacturing facility's capacity and expertise, creating Deloraine Dairy Solutions which saw its revenue contribute 17% of first quarter gross revenue. It's doing industrial dairy ingredient sales, contract manufacturing and end-to-end product development for global customers.
Bubs is expecting to be able to sustain continued growth momentum.
It's currently rated as a buy by the broker Citi, with a price target of $0.63.
