I believe that the lower prices we're seeing on the share market are presenting us with a good opportunity to invest in ASX growth shares.
Businesses that grow at a quick pace over the long term can benefit from a good rate of compounding over time.
Not every single business is going to achieve revenue growth every single year. But, if the long-term trend is upwards then it could be a promising one to consider. Amid all of the concerns about inflation and rising interest rates, investors have punished the valuations of companies, particularly ones that were predicted to grow strongly.
I'm looking at these two ASX growth shares as two of the opportunities on the market right now:
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Universal Store Holdings Ltd (ASX: UNI)
Universal Store describes itself as a specialty retailer of youth casual apparel that operates around 80 physical stores across Australia and two online stores. Those stores operate under the brands Universal Store and Perfect Stranger.
It aims to provide a frequently changing and "carefully curated" selection of on-trend apparel products to a target 16-to-35-year-old fashion-focused customer.
The business opened 11 new stores in FY22. Its "full potential" target is for at least 100 Universal Store sites across Australia and New Zealand. In the first half of FY23, five new stores are expected to open along with two store resizes.
In the first half of FY23, it's cycling against lockdowns and store closures in the prior year. During the first eight weeks of FY23, total sales were up 54.7% and group like-for-like (LFL) sales grew 5.4%.
The ASX growth share also recently announced it's going to buy Cheap THRILLS Cycles for an enterprise value of $50 million, representing 6.8x FY22's underlying earnings before interest and tax (EBIT). This business offers "vintage and coastal inspired youth fashion apparel with broad appeal". If it were part of the Universal Store business in FY22, it would have added 18% to the earnings per share (EPS).
I think the business has plenty of growth avenues, with new stores, more brands, online sales and operating leverage. It's also paying a dividend, which can boost shareholder returns.
At the time of writing, the Universal Store share price is down 0.6% at $4.97.
Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster is one of the largest retailers of furniture and homewares in Australia. It's already the largest pure-play retailer in this space. It sells a mixture of products from third parties, as well as private brand products. Items sold by third parties are shipped straight to customers from those suppliers.
I believe that more Aussies are going to buy more things online over time, which should be a natural tailwind for this e-commerce business.
But, I think Temple & Webster is running a good strategy to capture market share of the furniture and homeware sector. As it grows revenue, it's able to invest more into marketing, efficiencies, technology and so on. It's working hard on tools such as artificial intelligence and augmented reality so that customers can get recommendations and see products in their living room (or whichever room they are looking at).
I like that the ASX growth share is trying to grow into new areas such as home improvement (painting, tools and so on) as well as the commercial market. This increases its total addressable market.
In my opinion, the business has a good chance of being able to keep growing its number of customers and its revenue per customer, which will be useful for its long-term revenue growth. Returning customers can help reduce its required spending on marketing.
In early trading on Thursday, the Temple & Webster share price is up 5.89% to $5.03.
