I believe some ASX stock picks have exceptional potential over the long-term. I'm particularly excited by ASX small-cap shares that have the possibility of growing significantly in the coming years.
Smaller businesses are typically at much earlier growth stages than large ASX blue-chip shares. It's much easier to grow a business from $500 million to $5 billion than to go from $5 billion to $50 billion. There are only so many potential customers out there; eventually, a business reaches a saturation point.
It can be helpful if those businesses are operating in markets that have underlying growth tailwinds.
With the above in mind, I'll outline two ASX stock picks I'm excited about.
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Airtasker Ltd (ASX: ART)
Airtasker claims to be Australia's leading online marketplace for local services, connecting people and businesses that need work with people who want work. The platform offers numerous service categories, including delivery, furniture assembly, pest control, handyman tasks, photography, and more.
The recent FY24 update showed strong financial progress for the company.
It reported FY24 Airtasker platform fee revenue increased by 13.9% year over year, while UK fourth-quarter revenue increased 76.3% year over year. Airtasker's total revenue increased 5.6% year over year to $46.6 million.
Pleasingly, the business has made so much progress that it has reached positive cash flow of $1.2 million in FY24, an improvement of $8.8 million. The ASX stock pick achieved "strong operating efficiencies" across the business. The company has a gross profit margin of more than 90%, so most of its new revenue can turn into usable gross profit for growth spending/boosting the profit margins.
Airtasker says it has $11 million of advertising funding from two leading Australian media organisations to help accelerate its growth in Australia.
I think the company could be much larger in the next few years if its profit keeps rising rapidly.
Close The Loop Ltd (ASX: CLG)
This ASX small-cap share has locations across the US, Australia, South Africa and Europe.
One of its main activities is collecting and repurposing products through takeback programs in its resource recovery division. The business also provides sustainable packaging products through its packaging division.
It recovers a wide range of electronic products, print consumables, cosmetics, plastics, paper, and cartons, and it reuses toner and post-consumer soft plastics for asphalt additives.
The business is growing in several ways, and I think it's a good way to participate in the global push for increased sustainability.
Close The Loop is looking to expand geographically, increase the size of its existing operations in its markets, add a new Mexican refurbishment plant and construct a second TonerPlas line.
To me, this ASX stock pick is trading really cheaply. According to the estimates on Commsec, it's valued at 6.5x FY24's estimated earnings and 5.6x FY25's estimated earnings. I think the business would still be very reasonably valued even if the share price and price-earnings (P/E) ratio were 50% higher.
