Buy these great value 2 ASX growth shares: experts

Airtasker is one of the ASX shares that offers plenty of upside, a broker says.

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Key points

  • These two ASX growth shares have fallen hard this year, but are seen to be very good value
  • Local services business Airtasker has seen its share price drop around 60%
  • Plus-size apparel retailer City Chic has seen its share price decline approximately 60% as well

Some ASX growth shares are now looking really good value, according to some experts.

Volatility continues to be elevated on the ASX share market. Lower prices can mean investors get to buy businesses at a better value.

Here are two that experts now think offer large upside:

Airtasker Ltd (ASX: ART)

Airtasker describes itself as Australia’s leading online marketplace for local services, “connecting people and businesses who need work done with people who want to work”.

The company’s main customer base is currently in Australia. However, it’s rapidly growing in the UK and the US as well.

In the third quarter of FY22, Airtasker saw US marketplace-posted task growth of 90%, quarter on quarter. It is focused on four key cities in the US: Atlanta, Dallas, Kansas City, and Miami. However, it’s also seeing other marketplaces emerging in non-core cities.

In the UK, the ASX growth share’s third-quarter gross marketplace volume (GMV) increased 138% year on year.

Overall, the business saw third-quarter GMV growth of 24.9% to $51.5 million.

In the first half of FY22, the company saw a gross profit margin of 93%. A high gross profit margin means the business can re-invest most additional revenue into further growth initiatives.

How good value is the Airtasker share price? It has fallen by 60% over the last six months to 41 cents. Morgans rates it as a buy with a price target of $1.15. That implies a possible rise of around 180% over the next year. It likes that the company is managing to keep growing despite the wider economic issues that are happening.

City Chic Collective Ltd (ASX: CCX)

This ASX growth share specialises in retailing plus-size clothing, footwear, and accessories to women.

The company may be best known for its City Chic brand, which has a local store network. City Chic also has partnerships with various businesses in the northern hemisphere.

However, the company also has a large and growing presence in the northern hemisphere with businesses that it has acquired over time. In the UK, it owns the Evans brand. Avenue is its main business in the US. In Europe, City Chic wants to grow the Navabi business.

City Chic has a focus on growing its business through online channels. In the first half of FY22, the company said that 77% of its sales over the prior 12 months were online. In the actual half-year period, online comparable sales rose by 52.5%, with an 83% online penetration rate.

The ASX growth share points to a US$180 billion total global plus-size market, with a forecast that it will grow by around 7% annually. City Chic says there are increasing rates of plus-size women globally and the average annual spend on ‘plus-size’ is currently “materially less” than the rest of the women’s apparel market.

For the first 17 weeks of the second half of FY22, it reported “strong” total sales growth of 25% year on year, with US total sales growth of 47%. Australian online sales were up 13%. Second-half earnings before interest, tax, depreciation, and amortisation (EBITDA) is expected to be higher than the first half.

It’s currently rated as a buy by the broker Macquarie, with a price target of $6.70. That implies a possible rise of around 160%. That’s after the City Chic share price has fallen almost 60% over the past six months to $2.55. Macquarie likes the growth that the business is achieving and things seem good for the longer term.

According to Macquarie, the City Chic share price is valued at 14x FY23’s estimated earnings.

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. has recommended Airtasker Limited. The Motley Fool Australia has recommended Macquarie Group Limited. 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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