There are two leading ASX growth shares revealed in this article that have been sold off.
Not only are there the terrible events in Ukraine affecting the market, but inflation and interest rates have also been a major feature in investors' minds since the start of the year.
At the time of writing, the S&P/ASX 200 Index (ASX: XJO) has fallen 8% from the start of the year. However, just yesterday the ASX 200 dropped 3% as Russia started its invasion of Ukraine.
With the above in mind, these two ASX growth shares are two that have seen a heavy sell-off:
Altium Limited (ASX: ALU)
Altium is a leading electronic PCB software design business. During this decade, it is looking to dominate the industry and influence the sector the way the Microsoft was able to with its office software.
The Altium share price fell by over 4% yesterday and has dropped almost 30% since the start of the year.
It's making rapid progress in transitioning its subscriber base onto its cloud offering called Altium 365, which offers a high level of accessibility and collaboration for engineers. Altium 365 now has 19,700 monthly active users (up 54%) since August and over 7,700 monthly active accounts (up 29% since August).
The recent FY22 half-year result showed a return to strong double-digit growth. Revenue rose 28% to US$102 million. Octopart – an electrical part search engine – saw revenue growth of 105% to US$22 million. Octopart was helped by the tailwinds from the global electronic parts shortage.
Annual recurring revenue (ARR) is rising quickly. It rose 43% year on year and now represents 74% of total revenue.
Margins are rising again. The underlying earnings before interest, tax, depreciation and amortisation (EBITDA) margin increased from 30.6% to 34.1% year on year. This helped operating cash flow rise 78% to US$33 million. Profit after tax grew by 38% to US$23 million.
Altium points to the growing growth of the internet of things (IoT) with a rapid rise in the number of connected devices. This is a helpful tailwind.
The ASX growth share is now expecting revenue to grow by between 18% to 20% in FY22, with ARR growth of 23% to 27%. The EBITDA margin is expected to be between 34% to 36%.
Xero Limited (ASX: XRO)
Xero is a leading cloud accounting software business.
The Xero share price dropped 5.5% yesterday. It has now fallen by 36% since the start of the 2022 year.
Some brokers, like Macquarie, are now seeing good long-term value in Xero after such a steep decline.
The business continues to grow at a fast pace. Global subscriber growth is driving the annualised monthly recurring revenue (AMRR) higher. In the first half of FY22, AMRR rose 29% to $1.13 billion thanks to a 23% rise of total subscribers to 3 million and a 5% rise of the average revenue per user (ARPU) to $31.32.
Australia saw 124,000 net subscribers to reach a total of 1.24 million subscribers at the end of the half, whilst UK subscribers saw 65,000 net additions taking the total to 785,000. The 'rest of the world' segment is quickly growing revenue too. South Africa is seeing "strong progress", which is scaling from a large base of subscribers.
Xero's gross profit margin is now 87.1%, after increasing from 85.7% in the prior corresponding period. The ASX growth share is focused on investing in product development and partnerships to help drive cloud-based software adoption. The digitisation of tax compliance is another tailwind for the business.
