2 fast-growing ASX shares rated as buys in this correction

Adore Beauty is one of the ASX shares that has seen a decline.

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Key points

  • Adore Beauty and EML are both growing rapidly and are good value according to experts
  • Adore Beauty is a leading e-commerce ASX share which is working on improving its business in several ways
  • EML is a global payments business which provides the technology for multiple payment solutions

There are a number of fast-growing ASX shares that have seen sell-offs in recent weeks. Yesterday was a particularly tough time for some of the ASX's leading growth shares.

Lower prices may not necessarily mean some companies are opportunities.

However, there are a number of businesses that have been reporting operational growth. The decline that has occurred over the last month or two could prove to be attractive.

Here are two ASX shares that experts currently rate as buys:

Adore Beauty Group Ltd (ASX: ABY)

Since 6 January 2022, the Adore Beauty share price has fallen around 30%.

Morgan Stanley rates the beauty e-commerce business as a buy with a current price target of $6. That's more than 90% higher than where it is today.

The broker notes that the business has good potential for long-term growth and can achieve annual revenue growth of more than 20% over the next few years.

Indeed, in the first quarter of FY22, Adore Beauty achieved revenue growth of 25% to $63.8 million. Active customers increased 24% to 874,000 whilst returning customers increased 63%.

There are several areas that the ASX share is working on. One priority is 'range authority' where it builds a compelling product range and deepens its brand partnerships. It's also launching and scaling a private label brand.

It wants to provide customers with the best online transaction experience, which will help with site conversion.

Adore Beauty is also working on content-led customer engagement, by scaling and embedding the mobile app and loyalty program. It's also growing brand awareness and owned marketing channels (like its podcasts).

It's looking to unlock new addressable markets through related products and service adjacencies, as well as expand geographically into places like New Zealand.

EML Payments Ltd (ASX: EML)

As the name may suggest, EML is a global payments platform. It operates across 27 countries, with 23 multi-currencies. It also offers clients strong data security and maintains regulatory requirements.

It offers technology for things like open banking, digital wallets, virtual accounts, rewards cards, buy now pay later, branded gift cards, sports betting and gaming, government stimulus and emergency payouts.

Whilst there was a cloud of a threat from the Central Bank of Ireland (CBI) about limiting some of the ASX share's growth, the regulator said that it will permit EML to sign new customers and launch new programs whilst staying within the material growth restrictions. Broad based reductions in limit controls on programs will not be imposed.

The broker UBS currently rates the EML share price as a buy with a price target of $4.40. That suggests a potential rise of around 55% over this year, if the broker ends up being right. This price target was before all of the volatility though.

UBS thinks that EML now has a stronger footing for growth with customers, and the business looks less risky.

EML is expecting another year of operational growth in FY22. Revenue is expected to rise from $194.2 million in FY21 to a range of $220 million to $255 million in the current financial year. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to grow from $53.5 million in FY21 to a range of $58 million to $65 million in FY22.

That growth is on top of revenue growth of 60% and underlying EBITDA growth of 65% in FY21.

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 and has recommended EML Payments. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia owns and has recommended EML Payments. The Motley Fool Australia has recommended Adore Beauty Group Limited. 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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