Growth investors should put these 2 top ASX shares on the watchlist

Lovisa is one of the ASX shares that growth investors may be interested in.

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Key points

  • Here are two ASX shares that are growing quickly and expecting more
  • Lovisa is a globally-growing jewellery retailer
  • ELMO is an HR and payroll software business operating in the UK and Australia

ASX shares that are producing significant growth could be attractive to some investors.

Albert Einstein reportedly once said about the power of compounding:

Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.

But not every ASX share is destined to deliver long-term compound growth, however, these two ASX shares are hoping to keep growing for a long time.

Lovisa Holdings Ltd (ASX: LOV)

Lovisa is a global retailer of affordable jewellery.

It has a sizeable presence in a number of countries such as Australia, the USA, UK, South Africa, Singapore, Malaysia, New Zealand, France, Germany, Belgium, and the Middle East region. There are a few more European countries where it has a limited presence.

The company continues to grow its global store network, adding to its operating leverage and expanding its market presence.

Its growth and scalability were shown in the company’s FY22 half-year result. Revenue went up by 48.3%, earnings before interest and tax (EBIT) increased 59% and net profit after tax (NPAT) jumped 70.3% to $36.7 million.

The ASX share has high hopes for its global online offering. It is aiming to invest to achieve growth, while also generating satisfactory profit as well.

Since the start of 2022, the Lovisa share price has fallen by around 5%. That’s despite the company announcing that in the first eight weeks of the second half, sales were up another 61.7%.

ELMO Software Ltd (ASX: ELO)

ELMO Software is a growing HR and payroll software provider for small and medium-sized organisations in Australia and the UK.

Since the start of the 2022 calendar year, the ELMO share price has fallen around 13%.

However, the business continues to report a high level of growth. In its FY22 half-year result, revenue grew by 41% to $43.1 million and annualised recurring revenue (ARR) rose 35% to $98.3 million. ARR is now expected to reach between $107 million to $113 million in FY22, which was an upgrade from prior expectations.

The ASX share managed to achieve a positive earnings before interest, tax, depreciation and amortisation (EBITDA) of $0.3 million, up by $0.9 million from last year.

ELMO explained that operating leverage continues to improve with a reduction in key spending ratios across the business which has driven the positive EBITDA, as well as reducing the operating monthly cash burn by 36% year on year.

The company is now expecting to grow revenue by between 32% to 39% to between $91 million to $96 million. FY22 EBITDA is expected to come between $1.5 million to $6.5 million.

ELMO commented that its UK acquisitions are performing “exceptionally well” and provide a solid foundation to increase market share in the region.

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 Elmo Software. The Motley Fool Australia owns and has recommended Elmo Software. The Motley Fool Australia has recommended Lovisa Holdings Ltd. 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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