The ASX growth share area of the market can be a great place to find opportunities that, if things go well, can deliver sizeable returns.
I'm always looking for companies that could be much bigger in five years from now. It's that sort of timeframe where a business can really execute its longer-term plans.
ASX software shares get a lot of attention, but there are great opportunities in other industries which can produce good returns.
I'm going to talk about two ASX growth shares I've already invested in and plan to invest more in. If I had $5,000 to invest today, I'd want to buy the two stocks below.
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Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster is one of the leading e-commerce ASX shares, in my opinion. Its website sells a wide array of homewares and furniture.
One of the main benefits of the operating model is that a lot of the products sold are sent from suppliers, which allows the company to operate with a capital-light model. It can expand at a faster pace than if it had to hold all the inventory and be responsible for all the warehouses itself.
The business has a goal of reaching $1 billion in sales in the next few years. The company hopes that its home improvement (TheBuild) and trade and commercial divisions can deliver good growth and contribute a sizeable portion, around $200 million, of that sales goal.
I'm excited about the company's plans to utilise more AI throughout its business because of the ability to serve customers better and improve operating profit margins. In a recent trading update, Temple & Webster said its suite of internal solutions are delivering, in aggregate, a conversion rate increase of over 10%. AI is also handling around 40% of all customer interactions.
The company's sales performance from 1 January 2024 to 5 May 2024 was up 30% year over year, with both the trade and commercial and home improvement divisions seeing growth of over 30%.
I think the business can grow significantly in the years ahead, particularly if margins keep rising.
Close The Loop Ltd (ASX: CLG)
Close The Loop is an exciting ASX growth share because it taps into the global shift towards increasing sustainability.
The business recovers and recycles a wide range of items, including electronic products, print consumables, cosmetics, plastics, paper, and cartons. It also enables the reuse of toner and post-consumer soft plastics for asphalt additive. TonerPlas can help drive improvements in road durability and longevity.
Close The Loop is exploring IT refurbishment expansion opportunities in the US, EU and Middle East. It's also looking to grow its relationship with a key partner – HP – which has significant goals to improve the amount of electronics recycled.
The company has also pointed to an expansion of its European print consumables program into Spain and Portugal, with HP joining the program.
According to the estimate on Commsec, the Close The Loop share price is valued at under 6x FY25's estimated earnings.
