I think the most useful investments for wealth creation are ASX growth shares because of their ability to significantly scale over long time periods like five or ten years.
Profit growth is so important because the amount of profit generated is what investors value a business on. I'd say ASX growth shares have the best chance of delivering the largest returns because of their ability to deliver compounding.
Albert Einstein once reportedly said:
Compound interest is the eighth wonder of the world. He who understands it, earns it, he who doesn't, pays it.
A business that's growing profit at a fast rate could double its revenue/profit in just a few years. Here's why I think the two ASX growth shares below are among the most promising companies.
Temple & Webster Group Ltd (ASX: TPW)
This company is Australia's largest pure-play online retailer of furniture and homewares, with more than 200,000 products on sale from hundreds of suppliers. Its business model involves suppliers sending products directly to customers, which reduces the need to hold inventory, allows for a larger product range, and enables the ASX growth share to have a capital-light model.
Temple & Webster's product offering and the long-term trend of adopting online shopping are unlocking strong revenue growth.
In FY24, the company's revenue increased by 26% to $498 million. From early FY25 to 11 August 2024, revenue was up another 26%.
It aims to reach $1 billion of annual sales within the next few years, with strong growth expected in its core operations (with a $800 million target) and a growing contribution from its other areas (with a $200 million target), including its home improvement segment and the business-to-business (B2B) segment.
It's utilising AI and technology across its business for both the benefit of customers and its own operational efficiencies. For example, its AI live chat interactions with customers have led to millions of dollars of savings and an increase in the conversion rate.
Universal Store Holdings Ltd (ASX: UNI)
This company owns several premium youth fashion brands. Its key business is its Universal Store network of stores, but it also has CTC (which trades as the THRILLS and Worship brands) and is rolling out Perfect Stranger as a standalone business. At the latest count, it had 102 stores.
The ASX growth share is achieving a lot. In FY24 alone, sales rose 9.7% to $288.5 million, underlying operating profit (EBIT) grew 16.6% to $47.1 million, and statutory net profit after tax soared 45.3% to $34.3 million. I've been impressed with how the company has performed despite the difficult broader economic conditions.
FY25 has started incredibly well, with Universal Store sales up 15.3% and Perfect Stranger sales up 89.9%. Its products clearly continue to resonate with customers, and if it keeps growing its store network I think it has a very compelling future.
Strong revenue and profit growth are helping Universal Store's dividend grow each year. The annual payout has increased each year since FY21, and I think it can keep rising for at least the next few years.
