The share prices of many ASX growth shares have dropped amid all the uncertainty surrounding interest rates and the surge in cost-of-living inflation.
However, this uncertainty can provide an opportunity to take a closer look at companies with attractive long-term growth outlooks that are now trading at cheaper prices.
Specifically, I like the look of companies with the potential to use technology to improve their operations and profit margins. I believe these sorts of companies could deliver good investment returns if they can grow their revenue over time. I think the following two ASX growth shares fit the bill.
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Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster is an online retailer of furniture and homewares, with over 200,000 products for sale from hundreds of suppliers. Products are sent directly to customers by suppliers, which reduces the company's need to hold inventory, allowing for a larger product range and capital-light business model.
It also has a private-label range that is sourced directly by Temple & Webster from overseas suppliers.
The company has a trade and commercial division that offers exclusive product ranges, procurement, styling, delivery, and installation services. This segment grew revenue by 9% in FY23 and represented 10% of total revenue generated by the business.
Temple & Webster also has a home improvement product range for renovating and redecorating homes, selling bathroom, kitchen, laundry, and lighting items. These are sold on the main Temple & Webster platform and through a separate website called The Build.
I believe Temple & Webster has already built the digital infrastructure to succeed, and additional revenue should help grow margins over the next few years. In FY24 up to 13 August, revenue had grown by 16% thanks to both repeat and first-time customers, despite wider economic headwinds.
In FY23, revenue per active customer grew by 6% year over year, which demonstrates increasing loyalty and good organic growth.
Temple & Webster is expecting higher margins from growing scale, and AI is helping boost profitability at various stages of the customer process. For example, generative AI now powers the company's pre-sale product enquiry live chats, and it's working on an AI interior design service.
The retailer is aiming for annual sales of $1 billion within three to five years, is aiming to grow profit margins, is undertaking a share buyback, and had $105 million of cash on the balance sheet (with no debt) as at 30 June 2023.
The Temple & Webster share price looks like great value to me, after falling almost 60% from its September 2021 peak.
RPMGlobal Holdings Ltd (ASX: RUL)
This ASX growth share is a global leader in mining software solutions, advisory services, and professional development.
Since December 2021, the RPMGlobal share price has fallen by around a third. Yet, the company continues to grow at an impressive rate.
For the first quarter of FY24, total contracted value (TCV) derived from software sales was $13.2 million, a year-over-year increase of 154%. Annual recurring revenue (ARR) from software licensing and maintenance at the end of the first quarter was $56 million. During the FY24 first quarter, RPMGlobal signed a 'trusted supplier global framework agreement' (GFA) with a global tier-1 miner.
The advisory division also had a strong start to FY24, with the book of work balance increasing from $18.4 million at the start of the quarter to $24.2 million at the end of the quarter.
Due to the strong start to the new financial year, RPMGlobal increased its guidance for FY24. Profit before tax is now projected to be between $13.5 million and $15 million, up from a previous projected range of $12.5 million to $14 million.
Furthermore, the software-heavy revenue means the company can earn high margins on its earnings. As such, I believe profit can grow at a faster rate than revenue in the next few years, and revenue itself is growing at a strong rate.
