There are a handful of ASX growth share investments with the potential to grow tenfold over the next 16 years, in my opinion.
Huge businesses like BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA) are unlikely to grow that much because they are already very mature businesses with substantial customer bases.
It's easier for smaller businesses to deliver this sort of compounding growth over the long term. They are starting from a much smaller base — think how much easier it would be to grow from $1 billion to $10 billion than from $100 billion to $1 trillion.
An investment that increases tenfold in value over 16 years would need to rise at a compound annual growth rate (CAGR) in the mid-teens. In other words, a return of approximately 15% per annum is required.
If I had to select two ASX growth share investments that I believe are capable of that sort of return, I'd choose the two below.
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VanEck Morningstar Wide Moat ETF (ASX: MOAT)
I'm a big fan of this exchange-traded fund (ETF) because it provides Australians with exposure to some of the highest-quality businesses listed in the United States.
Good companies have competitive advantages that set them apart from their rivals and make it hard to be effectively challenged. Also called an economic moat, those competitive advantages can take different forms, such as brand power, patents, regulations and licenses, cost advantages, and network effects.
The MOAT ETF only invests in companies with strong economic moats that are predicted by Morningstar analysts to more likely than not endure for at least two decades.
But, on top of its selective investments, the MOAT ETF only invests in those high-quality businesses when they're at an attractive price to what the Morningstar team believe the stock is worth.
There is no guarantee the MOAT ETF will continue performing as well as it has. But, since its inception in June 2015, it has returned an average of 15.6%. If $10,000 grew at a CAGR of 15.6% over the next 16 years, it would become worth $101,700.
Temple & Webster Group Ltd (ASX: TPW)
This ASX growth share is one of the most promising businesses within the S&P/ASX 200 Index (ASX: XKO), in my opinion.
It's a sizeable online retailer of furniture and homewares, selling more than 200,000 products from hundreds of suppliers who send those products directly to customers. This means faster delivery times and a reduced need to hold inventory, which allows a larger product range and enables the company to be capital-light.
It also has a trade and commercial division as well as a large range of home improvement products.
Temple & Webster's offering is resonating with customers. In the FY24 result, revenue rose 26% year over year to $498 million despite its industry being down 4%. Active customers increased by 31% to an all-time high for 1.1 million.
The company aims to double its size in the next few years and reach $1 billion in annual sales.
This type of company could deliver significant operating leverage as it becomes larger. Temple & Webster has already developed its platform, so it just needs to keep adding sales volume to realise those scale benefits.
I think the company has many tailwinds that will help its revenue and profit over the next 16 years. Over the years, Aussies have been shopping more online, and this trend could continue in the long term.
Another tailwind is that generations like millennials and Generation Z are reaching the higher spending stages of their life.
Finally, the ASX growth share has the potential to deliver further expansion of its product range or even geographic growth.
In the ultra-long term, I think Temple & Webster's accelerating profit can help send its share price much higher in the coming years.
