Volpara Health Technologies Ltd (ASX: VHT) shares look very appealing to me. At the current time, the company is the top ASX growth share I'd want in my portfolio.
Volpara describes its business as making software to "save families from cancer". It says healthcare providers use Volpara to "better understand cancer risk, empower patients in personal care decisions, and guide recommendations about additional imaging, genetic testing, and other interventions". It's mainly focused on breast screening.
The ASX healthcare share recently announced its FY23 result which included a number of positives. These seem very promising for the ASX growth share's future. In my view, here are some of the main factors that make it attractive:
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Strong revenue growth
Volpara reported its revenue rose by 34% to NZ$35 million in FY23.
The business said all three of its core products (analytics, patient hub/MRS, and risk pathways) experienced "strong revenue growth" of 30%, 33%, and 49% respectively.
The ASX healthcare share has set guidance for FY24 revenue in constant currency terms of between NZ$40 million and NZ$42 million. This would represent a rise of 15% to 20% compared to FY23.
Volpara also saw its average revenue per account (ARPA) grow by 30% in FY23. That represents the annual recurring revenue (ARR) divided by the total number of customers.
The ASX growth share's net revenue retention was 107% for the year. Not only did the business hang onto a very high percentage of its revenue from existing customers during the year, but it managed to add more revenue from those customers.
Market share and cross-selling potential
The ASX healthcare share has estimated one of its software products has been used in more than 40% of mammography/breast screening volumes in the United States.
Volpara noted a "significant" portion of its customers only use one Volpara product.
Management thinks this presents an "excellent opportunity" for the company to cross-sell additional products to its existing customer base.
The company is looking to provide customers with a unified Volpara experience, integrating its products seamlessly.
There are a number of positives for the ASX growth share which could suggest further revenue growth.
Tailwinds could help, according to Volpara. These include mandatory breast density reporting in the US, an ageing population resulting in more women moving into screening age, and an "increasing incidence of breast cancer".
The company is working on expanding in Europe, which could open up a large new market for the ASX healthcare share.
Volpara is also trying to grow its products into new market segments, including insurance and employers, while also launching new products to its existing market including more risk models.
Finally, its revenue could be boosted by expanding in imaging beyond breast screening, and in risk beyond cancer. It's also looking at leveraging artificial intelligence to create "new models for image analysis and interpretation".
Improving profit margin potential
While total revenue rose 34%, gross profit went up 36%, thanks to a 1.3% percentage point improvement to 92.5%. The net loss after tax improved 40% to NZ$9.8 million.
Volpara pointed to its overall operating expenses reaching stability, with large improvements in each of its four major cost categories.
Its high gross profit margin and improving revenue can help deliver improving margins. The ASX healthcare share says its earnings before interest, tax, depreciation and amortisation (EBITDA) in FY24 could be breakeven.
I think the ASX growth share will demonstrate its rapidly improving profit margins over the next couple of years, which could really impress the market. Since the start of the year, the Volpara share price has risen 37%, as we can see on the chart below.
