ASX growth shares that are growing revenue at a relatively fast pace could achieve good returns for investors.
Smaller businesses can have much more return potential because they are typically much earlier on in their growth journeys than stocks like BHP Group Ltd (ASX: BHP) or Westpac Banking Corp (ASX: WBC).
One of the main elements that I like to look for is businesses with operating leverage where they can grow profit margins as revenue rises, enabling profit to grow even faster than the fast-growing revenue.
Below are two stocks that have global growth ambitions that I'm bullish about.
Siteminder Ltd (ASX: SDR)
This ASX growth share provides software called Siteminder that aims to unlock the full revenue potential of hotels. It also has Little Hotelier, an all-in-one hotel management software that "makes the lives of small accommodation providers easier."
Siteminder is an important part of the travel sector. It has the largest partner ecosystem in the global hotel industry, generating more than 115 million reservations worth over $70 billion in revenue for its hotel customers each year.
It's worth noting that Siteminder's management team includes Trent Innes, who serves as the company's chief growth officer. Innes previously held the position of managing director at Xero Australia and Asia, where he played a key role in helping the software company achieve 1 million subscribers. It's evident that Siteminder has a strong team with high-quality individuals.
The company is also growing rapidly – in the third quarter of FY24, revenue rose by 23.3% year over year to $46 million. The contribution from Siteminder's 'metasearch' offering, called Demand Plus, was especially strong, driven by accelerated adoption and strong booking activity. Annualised recurring revenue (ARR) increased 24.8% year over year to $187.6 million.
Profit margins are rising quickly – it reported underlying operating cash flow of $5.1 million for the FY24 third quarter, an improvement from a $3 million loss in the prior corresponding period, which the company attributed to sustained organic growth and operating leverage.
The business is targeting an organic revenue growth rate of 30% In the medium term, which suggests to me that profit could significantly rise from here. It looks good value, in my opinion, after falling around 10% in the past three months.
Corporate Travel Management Ltd (ASX: CTD)
This ASX growth share is one of the world-leading businesses that provides corporate travel management services.
The company has dropped more than 35% since 29 January 2024, making it significantly cheaper. That's despite the business having a much stronger market position than it did before COVID-19.
Corporate Travel is aiming to grow its earnings before interest, tax, depreciation and amortisation (EBITDA) at a compound annual growth rate (CAGR) of 15% over the next five years through new client wins, a high retention rate and project execution.
The company is aiming for revenue growth of at least 10% per annum over the next five years, with a target of winning $1 billion of new clients in FY25, with this rising to $1.6 billion per annum by FY29.
Corporate Travel also believes it can limit its cost growth to 5% per annum through productivity and innovation projects. This can help grow its market share and increase the usage of automation.
According to the profit estimates on Commsec, the Corporate Travel Management share price is valued at 15x FY25's estimated earnings and 12x FY26's estimated earnings. If the ASX growth share achieves those projected profit numbers, it could seem very cheap today.
