The ASX growth shares I'm going to tell you about in this article are delivering excellent revenue growth each year. That's a key reason why I think they can beat the market to 2025 and beyond.
When I think about what can help a business deliver good compounding returns, I'm hoping to see good revenue growth that can help deliver improving profit.
Net profit after tax (NPAT) is usually a key factor that investors look at to judge how much a business should be worth, so rising profit should, over time, equate to a rising share price.
With that in mind, the below two ASX growth shares are ones that could achieve a lot of profitable growth in the coming years.
Image source: Getty Images
Lovisa Holdings Ltd (ASX: LOV)
Lovisa is a global retailer of affordable jewellery which is mainly aimed at younger shoppers.
With how low-cost the items that the company sells are, it's very cheap for the company to expand its store network.
The company is already making good profit today, but the store numbers could grow significantly.
At the end of the FY23 first half it had a total of 715 stores, with 163 in Australia.
But, there are plenty of other established markets which have much larger populations than Australia yet much smaller store numbers, implying there is still plenty of growth potential for the company. For example, the UK only has 42 stores, France has 62 stores and Germany has 47 stores. It's only just opened its first few stores in Hong Kong, Canada, Mexico and South America
The most promising place for growth for Lovisa, in my view, is the USA where it had 155 stores. It only had 81 at the time of the FY22 half-year result. I could easily see the number of Lovisa stores in the US growing to over 1,000 in several years.
It ended HY22 with 715 stores and had 746 stores by 22 February 2023. I think the 31.9% growth of NPAT and 44.8% revenue growth in HY23 is just a sign of things to come over the next few years, particularly if the ASX growth share expands into India and mainland China.
According to Commsec, the Lovisa share price is valued at 22 times FY25's estimated earnings.
Siteminder Ltd (ASX: SDR)
Siteminder describes itself as the "world's leading open hotel commerce platform". It's used by tens of thousands of hotels across 150 countries to sell, market, manage and grow their business.
Despite cycling against strong comparisons, it was able to report 28.7% revenue growth in the three months to March 2023, compared to the three months to March 2022. It also reported that annualised recurring revenue (ARR) at the end of the FY23 third quarter was up 28.5% to $150.3 million.
Siteminder commented that its "forward booking activity has to date been strong for this year's northern hemisphere summer travel season."
It noted "good momentum across all parts of the business" and "continued strength in global travel demand as outbound Chinese tourism builds."
The ASX growth share also pointed to opportunities by its platform that will over time feature "automated and easy-to-use tools"
The company says that it's focused on leveraging its scalable business model, which bodes well for future profitability if revenue can keep growing at a good pace.
I think that improving underlying profit margins could be a helpful driver of the Siteminder share price over the next few years.
