2 exciting ASX small-cap stocks that could grow significantly

International growth is very compelling for these stocks.

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ASX small-cap stocks with international growth have so much potential, in my opinion. I'm going to talk about what I consider two of the most exciting options.

Today's big businesses were small companies once upon a time. Being able to buy good businesses at a fairly early point of their growth could mean going along for the ride and hopefully experiencing good shareholder returns.

Let's get into why I like the look of these two ideas.

Step One Clothing Ltd (ASX: STP)

Step One describes itself as a leading direct-to-consumer online retailer of innerwear. It offers an exclusive range of "high quality, organically grown and certified, sustainable, and ethically manufactured innerwear that suits a broad range of body types".

The company's biggest presence is in Australia. In the first half of FY24, it grew Australian revenue by 8.9% to $26.2 million.

Excitingly, the business also has a presence in the much bigger markets of the United Kingdom and the United States. In HY24, UK revenue rose 38% to $14.6 million, and US revenue increased 256% to 4.1 million.

In a world where there's a concerted effort for decarbonisation and a growing trend of consumers focused on products that harm the environment less, the ASX small-cap stock is gaining traction.

But it's not just growing revenue. There are also signs that Step One Clothing has operating leverage, where profit can grow even faster than revenue with rising margins. In HY24, the gross profit margin improved from 80.7% to 81.2%, while net profit after tax (NPAT) jumped 34.7% to $7.1 million (compared to the 25.5% rise of total revenue to $45 million).

According to Commsec estimates, the Step One share price is valued at 27x FY25's estimated value, with a possible grossed-up dividend yield of 5.1%.  

Siteminder Ltd (ASX: SDR)

Siteminder operates a software platform that it says "unlocks hotels' full revenue potential" and offers hotel management software that "makes the lives of small accommodation providers easier".

The end of COVID-19 has also seen the end of barriers blocking the full potential of global travellers to deliver helpful demand for hotels around the world. Siteminder continues to win new subscribers – in the FY24 first-half, the company reported its global customer property count increased 13.7% year over year to 41,600 with "strong growth in all regions".

Pleasingly, in HY24, there was "strong and consistent" revenue growth across all regions, with subscription revenue growth of 18.5% and transactional revenue growth of 30.5%.

Global travel numbers are expected to keep rising, which is a very helpful tailwind for the ASX small-cap stock.

And profit margins are improving significantly, which bodes well for future profitability. In HY24, the overall underlying gross margin improved by 69 basis points to 67.4%, thanks to the underlying subscription gross margin improving by 306 basis points year over year to 85% due to scale and operating leverage.

Those improving numbers led to the HY24 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) improving from a loss of $14.6 million in the prior corresponding period to a loss of $1.2 million in HY24.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended SiteMinder. The Motley Fool Australia has positions in and has recommended SiteMinder. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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