ASX growth shares are attractive potential investments if they're able to achieve solid compounding growth over the long term. I think September could be a good time to buy shares because of the volatility and lower prices that we're seeing.
Uncertainty has increased amid higher inflation and rising interest rates. Investors have pushed down the values of share prices.
With much cheaper prices, I think it's definitely worth considering some of these names that are benefiting from revenue and scale growth. Here are two to consider:
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is a leading e-commerce business that sells more than 12,000 products from a diverse portfolio of more than 270 brands.
The business has been growing at a solid pace for a number of years. FY22 revenue rose 11% to $200 million and it was up 65% compared to FY20. The company put this growth down to "valuable returning customers with higher average order values". Returning customers rose 31% to 472,000 and 115% up on FY20. Returning customers contributed 70% of all revenue, up from 62% in FY21. Its mobile app contributed 11% of total revenue.
I think the business has plenty of growth potential because of the steady shift from beauty product retail buying to online shopping, where Adore Beauty is the leader. Margins can rise over the long-term as Adore Beauty manages to connect with more customers through its free channels such as podcasts and its loyalty program. Scale will also naturally help profitability in the coming years.
Another positive for the ASX growth share is the launch of the first owned brand called Viviology — private brands can achieve higher margins.
While short-term revenue may be volatile, I think it's encouraging that the company expects to return to double-digit revenue growth in the second half of FY23.
Betashares Global Cybersecurity ETF (ASX: HACK)
This is an exchange-traded fund (ETF) which is tapping into a very interesting theme. The world is getting increasingly complex and digital. It's very important that governments protect their citizens' information and that businesses protect customer details.
But, cybercrime is growing as well. As an example, the Australian Cyber Security Centre (ACSC) reported that in FY21, it received more than 67,500 cybercrime reports, an increase of nearly 13% from the previous financial year. The ACSC said:
The increasing frequency of cybercriminal activity is compounded by the increased complexity and sophistication of their operations. The accessibility of cybercrime services – such as ransomware-as-a-service (RaaS) – via the dark web increasingly opens the market to a growing number of malicious actors without significant technical expertise and without significant financial investment.
This is where cyber defence businesses come in. There is a group of businesses that are dedicated to protecting organisations and individuals from cybercrime.
The Betashares Global Cybersecurity ETF gives investors access to a portfolio of cybersecurity businesses from across the world, including: Crowdstrike, Cloudflare, Palo Alto Networks, Zscaler, Cisco Systems, Booz Allen Hamilton, SentinelOne, Verisign, and Cyberark Software.
The ASX growth share has managed net returns per annum of 14.9% per annum over the prior three years. While past performance is definitely not a guarantee of future returns, I think it shows how well the underlying businesses have been performing. The sector is expected to grow from US$137.6 billion in 2017 to US$248.3 billion in 2023, according to Statista.
