With the ASX share market starting to rebound, I think it's a great time to be looking at ASX shares with good growth potential.
Inflation seems to be peaking in the US and Australia. Although it's still a long road to a low and healthy inflation rate, progress has been made and this could be a positive thing for investors and shares.
I think the ASX tech shares that have been hit hard but have impressive financials are ones to get excited about. Their long-term outlooks seem very compelling.
Xero Limited (ASX: XRO)
The Xero share price is up by 17% since the start of the year. But, it's still down around 47% from November 2022.
This ASX tech share provides accounting software for business owners, accountants, bookkeepers, and the like.
With the business still growing, I think the much lower valuation is far more appealing. With a gross profit margin of 87%, any growth the business achieves adds value to Xero.
In the FY23 first-half result to 30 September 2022, the number of subscribers increased 16% to almost 3.5 million, average revenue per user (ARPU) grew 13% to $35.30, and operating revenue surged 30% to $658 million.
Thanks to the growth in the financial measures I just mentioned, Xero's annualised monthly recurring revenue (AMRR) had reached $1.48 billion at September 2022, suggesting that some growth is already baked in for the next 12 months.
I think it won't be too long until the Xero share price gets back to above $90 as investor sentiment returns.
Volpara Health Technologies Ltd (ASX: VHT)
This is one of my favourite ASX healthcare shares. It provides software that enables advanced breast screening analysis, with a focus on risk for the patient. Volpara also has operational software for medical professionals to improve their workflow and efficiency.
In the company's half-year result for the six months to 30 September 2022, it said that 40.5% of US women who had breast screenings had at least one Volpara product applied on their images and data.
Its HY23 gross profit margin was almost 92% – so this is another example of where revenue growth can be a very useful thing for the company's financials.
In the three months to 31 December 2022, Volpara saw record quarterly cash receipts of NZ$11.2 million. This was an increase of 42% in constant currency terms and enabled the business to achieve its first positive net cash flow quarter on record.
Since the start of 2023, Volpara shares have soared an impressive 49%. Despite that, the ASX share is still down by around 35% since October 2022. With the progress the business is making, I think there's more to come in the next few years.
