ASX growth shares are some of the most exciting investments to own, thanks to their ability to deliver rapid earnings growth.
When businesses can grow both their top line and their profit margins, it can supercharge the net profit after tax (NPAT), which is typically what investors are most focused on.
Analysts are always on the lookout for which stocks could deliver good returns.
Broker UBS currently has buy ratings on some promising businesses, which are predicted to deliver significant earnings growth in the coming years. Let's look at two that UBS is optimistic about.
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PEXA Group Ltd (ASX: PXA)
The broker describes PEXA as a business that operates the leading digital property settlement platform in Australia, handling property transfer and refinancing transactions.
After seeing the company's FY25 third-quarter update, UBS noted PEXA's overall momentum remains "broadly consistent" with its FY25 guidance. Domestically, overall exchange volume growth was in line with UBS' expectations, supported by stronger growth in lower margin refinances, though pleasing progress in its digital solutions revenue should offset that.
UBS thinks the UK business will contribute notable earnings in two or three years, suggesting "material medium-term value upside". The broker is focused on whether the ASX growth share can attract UK bank and conveyancer customers – a product launch in the second half of 2025 remains on track, with FCA UK regulatory approval now in place.
UBS said:
With PXA's share price attributing negligible UK value in our view, we see compelling medium-term upside and retain a Buy rating.
The broker currently has a price target of $15.30 on the business, implying a possible rise of around 20% in the next year.
TechnologyOne Ltd (ASX: TNE)
UBS describes this ASX growth share as an enterprise software solutions provider. It offers software for a range of industries, including local, state, and federal governments, financial services, education, utilities, and health and community services. It has operations in Australia, New Zealand, the UK, Asia, and the South Pacific.
UBS recently analysed the FY25 half-year result and noted it included 21% year-over-year growth of annual recurring revenue (ARR) and profit before tax (PBT) growth of 33%. The broker said PBT outperformed expectations because marketing costs were deferred into the second half of FY25.
TechnologyOne is guiding that PBT could grow between 13% to 17% in FY25. UBS points out that the ASX growth share has a track record of outperforming guidance.
UBS has confidence that the company can continue growing its revenue. The broker believes PBT can continue growing (and accelerate in FY26 and FY27), with a prediction of 18% PBT growth in FY25, 19% in FY26, and 20% in FY27.
A key part of the company's growth is net revenue retention (NRR)—how much revenue the ASX growth share achieves from its existing client base each year. The company is targeting an NRR of at least 115% each year, implying 15% organic revenue growth without winning any new customers. Expanding in the UK is an important part of its ARR and NRR growth plans—the UK saw 50% ARR growth year over year in the recent results.
Can TechnologyOne continue a NRR growth rate of 115% over the longer term? UBS said:
Traction from recent product initiatives, better understanding of the unit economics and multiple conversations with Australian and UK customers have given confidence on the sustainability of TNE's 115%+ pa NRR target. We see TNE growing profits at~20% pa medium term.
We have analysed the key NRR drivers over the medium term and had multiple conversations with customers and industry participants. Our industry conversations suggest: 1) Positive customer feedback on product; 2) Willingness of customer to take further products like DXP, as well as the SaaS + implementation model; 3) Favourable competitive backdrop in both Australia and the UK. The financial economics of both DXP and SaaS+ are particularly attractive long term, and perhaps not yet fully understood by the market.
That all sounds positive for the ASX growth share – UBS has a buy rating on TechnologyOne shares, with a price target of $42.20. That implies a possible rise of 2% in the next 12 months.
UBS thinks TechnologyOne's net profit can more than double between FY25 and FY29.
