Looking for ASX growth shares? I rate these 2 as buys

I think two picks look capable of producing major gains.

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Investing is all about delivering positive results over the longer term, and ASX growth shares can produce strong returns due to their rise in underlying value and earnings compounding.

In five years from now, investors want their portfolios to be worth substantially more than they are today. Here are two ASX growth shares that I believe can produce excellent returns in the coming years.

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is a leading online retailer of homewares, furniture and home improvement products.

The Temple & Webster share price has fallen by around 25% since 27 March 2024, as shown in the chart below. However, its ongoing business progress indicates that this is a much more compelling time to buy than a few months ago.

At a time when many Aussie households are struggling amid a high cost of living and elevated interest rates, the business has been growing its market share.

In a recent trading update, Temple & Webster revealed total sales were up 30% from 1 January 2024 to 5 May 2024. The company said the overall furniture and homewares market was down 4% in the half-year to date.

Products exclusive to Temple & Webster are now generating more than 40% of revenue which helps entrench its market position. Its trade and commercial and home improvement segments have both seen growth of over 30% in the half to date.

The ASX growth share has also been tapping into AI to improve efficiencies and margins. AI has helped boost the conversion rate by more than 10% and is now handling around 40% of all customer interactions.

As Temple & Webster grows, I think it can achieve greater profit margins, particularly as its fixed costs as a percentage of revenue reduce. I'm excited by the company's ongoing expansion into other areas, such as home improvement, because that's a big market category (including paint, plumbing fixtures, flooring, window furnishings and so on).

I'm a shareholder today in this ASX growth share because I believe in the company's long-term future.

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

This exchange-traded fund (ETF) focuses on some of the leading businesses in the United States, and I think it has the potential to deliver good returns.

While many companies are listed in the US, their underlying earnings usually come from around the world. This gives the VanEck Morningstar Wide Moat ETF more geographic diversification than it appears.

For this portfolio, Morningstar analysts only choose stocks whose share prices they believe are trading at an attractive level compared to their fair value. In other words, they rate a business as being materially undervalued.

In addition, the MOAT ETF only includes businesses that Morningstar believes have economic moats that are almost certainly going to endure for the next decade and, more likely than not, persist for the next two decades.

I'm calling it an ASX growth share because of its ability to deliver strong returns. From the ETF's start date to 31 May 2024, it has delivered an average annual return of 15.3%, though past performance is not indicative of future returns.

Motley Fool contributor Tristan Harrison has positions in Temple & Webster Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group. The Motley Fool Australia has recommended Temple & Webster Group and VanEck Morningstar Wide Moat ETF. 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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