There is plenty of uncertainty that investors can focus on at the moment, including widespread inflation, higher interest rates, Ukraine, China and so on. But, amid all this economic pain, I believe ASX growth shares could be an effective way to invest for 2023 and the longer term.
Companies that could grow revenue well over the long term may be able to grow their profit and also the share price, in time.
I think the names on the ASX with the most compelling potential are those that are expecting to grow internationally. I'm also looking for ones that are keeping shareholders in mind – it's not just growth for growth's sake.
Here are three of my favourite ideas.
Airtasker Ltd (ASX: ART)
With a market capitalisation of just $160 million, according to the ASX, I think Airtasker could be one of the most compelling ASX growth shares that could achieve global growth.
For readers that haven't heard of the business before, it operates a platform that connects people who need work done with those that want to do the work. There are dozens of categories available such as furniture assembly, removalists, photography, bookkeeping, food delivery and many more.
I believe the future is bright for the company, particularly with the ongoing double-digit growth that it is achieving every quarter.
In the first quarter of FY23, the Airtasker platform (excluding Oneflare – an acquired business) saw revenue growth of 36% to $8 million.
Global growth continues – UK gross marketplace volume (GMV) grew 68% year over year, while US posted tasks jumped 4.7x year over year to 13,000.
It has a gross profit margin of more than 90% and it's close to breakeven on an earnings before interest, tax, depreciation and amortisation (EBITDA) basis, so I think the business is financially well-positioned to invest strongly for longer-term growth.
Lovisa Holdings Ltd (ASX: LOV)
Lovisa is one of the most promising ASX retail shares, in my opinion. It sells affordable jewellery to younger shoppers.
The Lovisa share price has been a strong performer in 2022 already, it's up by more than 20%. But I think there could be plenty more in the coming years.
It earns a high gross profit margin of close to 80%, and a typical store makes impressive profit considering how much it costs to set up. That's why I think the global store rollout plan is very convincing.
In a recent FY23 update, Lovisa said it had opened another 47 net stores in the financial year to date, taking its total to 676 stores. I believe this will be a natural boost to sales, and therefore profit, once the stores are up and running.
Lovisa has opened in a number of new markets recently, including Canada, Poland, and Hong Kong. It's quite possible the Hong Kong expansion is a prelude to expansion into China, which would be a huge market for the business to grow in.
The ASX growth share is also planning to open in Italy, Mexico, and Hungary in the near term.
With FY23 comparable store sales up 16.1% year over year and total sales up 60%, I think Lovisa is on track to achieve good profit growth in FY23 and beyond.
Betashares Global Quality Leaders ETF (ASX: QLTY)
This ASX exchange-traded fund (ETF) gives investors a way to get investment exposure to 150 businesses that are listed around the world. The portfolio is a globally-focused one, with US companies being around 61% of the total weighting.
But, there are a number of other places that represent more than 1.5% of the portfolio: Japan (13.7%), the Netherlands (4.2%), Switzerland (4%), France (3.3%), Denmark (3%), Hong Kong (2.5%), the UK (1.9%), and Sweden (1.7%).
What I like about the holdings in this ETF's portfolio is that they rank well on a number of 'quality' metrics, including return on equity, debt-to-capital, cash flow generation ability and earnings stability.
In other words, they make good profit each year, generate attractive cash flow, have little debt and make high levels of profit for how much shareholder money is currently invested in the business.
The portfolio's weightings are largely similar, but the biggest positions are a little bigger than the smaller ones. Currently, its biggest positions include ASML, Applied Materials, Nvidia, Automatic Data Processing and Cisco Systems. I think the overall portfolio composition means this ETF can be classified as an ASX growth share because of how the underlying businesses are growing.
With the ASX ETF down close to 20% this year, I think it's a good time to get exposure to this portfolio of 'quality' companies.
