ASX growth shares have the potential to deliver attractive returns over time, given their earnings' ability to compound at a strong rate.
The two businesses I'm about to cover are expected to deliver an impressive compound annual growth rate (CAGR) of profit between now and the end of the decade.
Based on the bullish price targets, both of the following stocks could see double-digit returns within the next 12 months.
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Superloop Ltd (ASX: SLC)
UBS describes Superloop as a business that provides telecommunications infrastructure, cloud and broadband services in the Asia Pacific region.
It has a wholesale division that services large-scale telco, data and telco customers, as well as retail internet service providers (ISPs) that do not have access to their own connectivity.
The business segment services small, medium and large corporate customers that purchase connectivity services to facilitate their core businesses. Finally, the consumer segment provides basic internet and mobile phone products for domestic residential use.
UBS notes that the company is expecting FY26 operating profit (EBITDA) to be between $109 million to $117 million, which would represent growth of between 18% to 27%.
Following UBS' analysis of the ASX growth share's AGM update, the broker noted the key area of subscription growth weakness was in the wholesale segment, meaning Origin Energy Ltd (ASX: ORG), which only saw 1,000 additions. This was likely because its NBN plans were around 30% higher than the median (competitor) NBN reseller price.
But, since 1 November, Origin is now offering nearly the cheapest NBN plans in the market, which has reportedly driven an increase in wholesale subscription growth for the ASX growth share to an implied 4,000 per month net add rate. UBS expects wholesale subscription growth of 5,000 per month for the rest of FY26.
UBS also expects the consumer segment to add around 70,000 over the financial year, with around 5,800 per month.
The broker concluded:
We still remain very supportive of the growth opportunity that exists for Superloop given its position as the key enabler of challenger broadband market share gains. We believe challengers can lift their mkt share to c.35% from current levels of c.20% creating a still to be won A$3.1bn revenue opportunity. This underpins our forecasted 3yr cash EPS CAGR of 26%.
…We also like the upside opportunity being created in the high multiple Smart Communities earnings stream.
UBS predicts the company could grow its net profit from $42 million in FY26 to $97 million in FY30. It's currently valued at 31x FY26's estimated earnings. The broker has a price target of $3.40, implying a possible rise of 36% within a year.
TechnologyOne Ltd (ASX: TNE)
UBS describes this ASX tech share as an enterprise software provider which offers a suite of solutions for local, state and federal governments, financial services, education, utilities, health and community services.
The broker is optimistic on the ASX growth share because of its ongoing net revenue retention (NRR) of 115%. That figure describes how much revenue the business has made from customers that it had last year, implying 15% revenue growth year-over-year from existing customers.
There are two reasons why UBS believes NRR can continue to be at least 115%:
1. Launch of AI products provides a new monetisation opportunity; 2) UK ramp remains very strong.
The broker believes the ASX growth share can grow its profit before tax (PBT) at around 20% per year over the next five years, which is why it rates the company as a buy. If NRR grows faster than 115%, then PBT growth could be faster than 20% per year.
There are two other reasons why UBS has conviction in the growth story and the quality of the business:
3) Cash conversion: typically strong at 129%; 4) Capital management: Result included a 10cps special dividend and increase in future payout ratio range to 65-75% (from 55-65%).
In other words, the business is generating pleasing cash flow compared to its reported profits and the company is rewarding investors with more generous dividends.
UBS predicts that the ASX growth share can grow its net profit from $163 million in FY26 to $340 million in FY30. The UBS price target is now $38.70, implying a possible rise of 42% within the next year.
