ASX tech shares have the ability to produce attractive profit growth over the long-term, which may help deliver good returns.
Businesses that use a lot of technology for their offering can benefit from operating leverage as they scale.
With that in mind, here are two ASX tech shares that could make compelling long-term investments:
Betashares Global Cybersecurity ETF (ASX: HACK)
This is an exchange-traded fund (ETF) that specialises in giving investors exposure to some of the world's leading businesses in the cybersecurity space.
There is so much information and other functions (like online banking) carried out online now that make the internet such a tempting target. Sadly, the number of cyber-attack attempts is also increasing.
It's up to some of the businesses in this ETF's portfolio to keep businesses, governments, and individuals safe.
At the latest disclosure, these are the 10 largest holdings of the ASX tech share: Cisco Systems, Palo Alto Networks, Accenture, Crowdstrike, Check Point Software, Juniper Networks, Cloudflare, VMware, Leidos, and Mandiant.
The Betashares Global Cybersecurity ETF has an annual management fee of 0.67%.
Past performance is not a guarantee of future results. However, the Betashares Global Cybersecurity ETF has returned an average of 20.3% per annum since inception in August 2016.
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is a leading e-commerce business that sells beauty products. It says it sells 11,700 products from more than 270 brands.
The company recently announced its FY22 half-year result which showed record revenue and customer numbers.
Half-year revenue was up 18% to $113.1 million. Active customers rose 13% to 876,000 and returning customers grew by 56%. Despite this, the Adore Beauty share price is down 41% this year.
Profitability also continues to grow at the company. The gross profit margin was 33.1%, an increase of 0.6 percentage points, underpinned by product margin expansion and brand funding according to the company.
The ASX tech share generated earnings before interest, tax, depreciation and amortisation (EBITDA) of $3.8 million, with an EBITDA margin of 3.3%. This was in-line with guidance and reflected the re-investment.
Adore Beauty is investing heavily for growth, with areas like content engagement, brand building, and growing its organic channels. Owned marketing channels are positively impacting marketing costs, which are trending significantly below industry inflation.
Investment areas for the business include its private label, mobile app, loyalty, and adjacency expansion. It wants to capture as much market share as it can of the $11 billion market which is benefiting from significant structural tailwinds. The first private label skincare brand is expected to launch in the fourth quarter of FY22.
UBS is one of the brokers that currently rate Adore Beauty as a buy, with a price target of $4.70. That suggests a potential upside of almost 100% over the next year. The broker thinks that the ASX tech share will be able to deliver good compound growth of revenue over the coming years.
