The ASX penny stock Airtasker Ltd (ASX: ART) is one of the most exciting ASX small-cap shares around.
I love finding stocks that have the potential to grow revenue and their profit margins significantly, as they are the ones that might achieve significant shareholder returns.
The business I'm talking about is Airtasker. This company operates a platform that brings together people needing help with a task and people/businesses with the skills to do that work.
It has the financials to do something special if things go right.
Strong profit margin to unlock rapid earnings growth?
The company recently reported its FY24 first-half result. In the six months to December 2022, its gross profit margin was 94.4%, while it increased to 95.7% in HY24. This is such a high margin that almost all of the new revenue is turning into gross profit.
I'm not expecting the gross profit margin to remain above 95%, but being above 90% is very impressive.
Extra gross profit means it can spend more on growth initiatives and/or allow its profit lines to increase, such as earnings before interest, tax, depreciation and amortisation (EBITDA) and net profit after tax (NPAT).
Despite the challenging economic conditions, group revenue rose by 6.8% to $23.3 million.
We saw HY24 group EBITDA improve by $7.1 million to $2 million, NPAT increased by $7.48 million to $0.2 million and non-statutory free cash flow grew by $4.75 million to $0.1 million.
Airtasker has tipped into profitability, which could be a real turning point for the ASX penny stock if it can keep growing revenue.
Strong international growth for the ASX penny stock
Airtasker has built a strong position in Australia and I'm excited by its efforts overseas.
In the UK, the company has formed a media-for-equity partnership with Channel 4, after successful growth in Australia using this model. Posted tasks in the UK are already up 30%. The company said its trailing 12 months (TTM) of revenue was up 33.6% to £532,000, while UK TTM gross marketplace volume (GMV) rose 10.1% to £3.8 million.
In the US, HY24 TTM GMV increased 46.3% to US$0.5 million, while revenue rose 132.4% to US$57,000.
The numbers generated in the UK and the US are currently small, but if those regions keep compounding at similar rates, they could become sizeable contributors to the overall business. There are a number of other markets that Airtasker could expand into, such as Canada and New Zealand, though I'm not expecting that to happen any time soon. It's a useful growth lever to have.
Foolish takeaway
The ASX penny stock has a lot of growth potential, with the margins and business model to scale significantly. Now it just needs to execute on the growth prospects and deliver rising GMV.
