I think ASX growth shares can unlock excellent returns because of how much larger they can become, thanks to the power of compounding.
If we can identify smaller businesses before they become big, then we can benefit from those future winners.
I'm particularly interested in businesses that are able to demonstrate operating leverage – where profit can rise faster than revenue. This is a great factor in my mind because investors typically value a business based on how much profit a business is currently making and how much it could generate in the coming years.
In my portfolio, I'm particularly excited about the following two ASX growth shares and I don't think the market is fully appreciating the potential of these businesses.
Tuas Ltd (ASX: TUA)
Tuas is a rapidly-growing Singapore-based telecommunications business. In the FY25 half-year result, the total number of active mobile services increased to 1.16 million, up 23.7% year over year. It has done an excellent job of capturing over 1 million customers with low-priced mobile plans.
I'm hopeful the company can continue winning new mobile customers at a good pace in Singapore, while also expanding to other nearby Asian countries to help its total addressable market.
The company's finances are rapidly going in the right direction, in my view. HY25 revenue rose 33.8% and this helped operating profit (EBITDA) increase by 47.8% to $33.1 million.
If the company can gain meaningful traction with its Singapore broadband business and grow internationally with its mobile business, which I'm optimistic about, then I'd expect the Tusa share price and profit to perform pleasingly in the coming years.
It recently became profitable at the net profit after tax (NPAT) line of its financials, generating $3 million of net profit in the first six months of FY25. I'm expecting plenty more growth.
Siteminder Ltd (ASX: SDR)
Siteminder is one of my favourite ASX tech shares right now because I don't think the market is appreciating the quality of the business, which is evident through its ongoing strong revenue growth despite economic headwinds.
This business has been a focus of my own investment portfolio and my writing as well. I'm still very optimistic about the company.
I think there is great potential for the business to see surging revenue and profit as its annual recurring revenue (ARR) grows, profit margins improve and global travel demand hopefully recovers. The company's new smart platform has a great ability to unlock further revenue growth with additional subscribers.
Partly thanks to its scaling, Siteminder reported its underlying gross profit margin increased by 118 basis points (1.18%) to 66.9%, compared to the second half of FY24.
Siteminder said it has made changes to its technology and data teams, bringing them closer together, so it can "harness the power of AI and data opportunities" across the business.
The ASX growth share is targeting an organic annual revenue growth rate of 30% in the medium term, helped by contributions from the smart platform.
Siteminder says its smart platform is a convergence of distribution, intelligence and revenue optimisation. The unified experience is aimed at maximising hotel revenue. I think this will be a key driver of revenue (and profit) in the coming years.
The company continues to see operating leverage when it comes to operating expenditure related to sales, marketing and product development. This should help its various profit levels in the coming years, in my eyes.
