Analysts name 2 profitable ASX growth shares with 40%+ upside

Here are two ASX growth shares to buy…

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If you’re interested in adding some growth shares to your portfolio, then the two listed below could be top candidates.

Both these ASX growth shares are highly profitable and have been tipped to continue their strong growth long into the future.

Here’s what you need to know about them:

ResMed Inc. (ASX: RMD)

The first ASX growth share to look at is this sleep treatment focused medical device company.

Over the last decade, ResMed has been growing its sales and profits at a consistently strong rate thanks to increasing demand and its growing addressable market.

The good news is that the company still has a significant market opportunity to grow into, with the majority of sleep apnea sufferers still undiagnosed. In addition, the company has a large opportunity with its connected-care digital platform.

It is partly because of the latter than Morgans is very bullish on ResMed. It commented:

While we believe the next few quarters will likely be volatile, as Covid-related demand for ventilators continues to slow and core sleep apnoea volumes gradually lift, nothing changes our medium/longer term view that the company remains well-placed as it builds a unique, patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.

Morgans currently has an add rating and $40.46 price target on its shares. Based on the current ResMed share price of $27.86, this implies potential upside of 45% for investors.

TechnologyOne Ltd (ASX: TNE)

Another ASX growth share that could be a quality option for investors is TechnologyOne. It is an enterprise software provider servicing the government, financial services, health and community services, education, and utilities and managed services markets.

TechnologyOne has recently shifted its focus to its software-as-a-service (SaaS) ERP solution, which delivers the TechnologyOne enterprise suite as a service through the cloud to customers.

This shift of focus has been going well, with the company reporting SaaS annual recurring revenue (ARR) growth of 43% to $192.3 million in FY2021. But management doesn’t expect it to stop there. It reiterated that it expects its annual recurring revenue (ARR) to reach $500 million by FY 2026.

Analysts at Goldman Sachs suspect that TechnologyOne could even outperform this target, noting that the risks are to the upside. It said:

In our view, TNE is well-placed to meet its A$500mn FY26 ARR target and we are more constructive than consensus and the market (as implied by TNE’s current share price). SaaS flip uplift, elevated inflation (via contractual CPI pass-through) and underlying business growth underpin our A$505mn FY26 ARR estimate, and we think risks are skewed to the upside with our estimates assuming modest organic growth ex-flip (~10%).

Goldman has a buy rating and $14.00 price target on the company’s shares. Based on the current TechnologyOne share price of $9.95, this implies potential upside of 40% for investors.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has recommended ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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