Insights

2 ASX shares that are growing profit very fast

There are some ASX growth shares that grew EBITDA by more than 100% in FY20 such as e-commerce business Redbubble Ltd (ASX:RBL).
The post 2 ASX shares that are growing profit very fast appeared first on Motley Fool Australia. –

ASX growth shares

Some ASX growth shares grew their operating profit by a lot in FY20. Some of them more than doubled the earnings before interest, tax, depreciation and amortisation (EBITDA).

As described in the linked EBITDA guide above, this profit measure is used to show the day to day profitability of a business.

Businesses that grow EBITDA usually grow net profit and earnings per share (EPS) too. EPS growth is a key factor that many investors focus on to determine the appropriate share price for a business.

Here are two ASX growth shares that grew the EBITDA by more than 100% in FY20:

Redbubble Ltd (ASX: RBL)

Redbubble managed to increase its operating EBITDA by 141% to $15.3 million in FY20 and EBITDA went up by 358% to $5.1 million.

The e-commerce ASX share is an online marketplace which sells artist-produced products like phone cases, wall art, clothing and masks. It operates both the Redbubble and TeePublic online sites.

In FY20 there was a significant increase in activity, partly due to COVID-19. Marketplace revenue grew 36%, gross profit went up 42% and free cashflow improved to $38 million.

At the time of the FY20 result, Redbubble Martin Hosking said: “RB Group’s on-demand fulfilment model and differentiated consumer offerings provide us with distinctive advantages. The strong financial performance follows from these fundamentals. It has been pleasing to see the acceleration of existing trends in the last few months. 2021 represents a year of opportunity for the business. We are positioned to build on a decade of momentum and aggressively pursue the global opportunity presented by the shift to online activity and increasing adoption of e-commerce platforms.”

The ASX share recently told investors about its FY21 first quarter performance. Marketplace revenue went up 116% to $147.5 million, gross profit grew 149% and it generated EBIT of $22.1 million.

The Redbubble share price has gone up by 453% over the past six months.

Kogan.com Ltd (ASX: KGN)

Kogan.com is another business that is generating large profit growth under the current circumstances.

The ASX share revealed that in FY20 its gross sales went up 39.3% to $768.9 million with revenue rising 13.5% to $497.9 million. Active customers increased by 35.7% to 2.18 million in FY20.

Kogan.com’s gross profit went up by 39.6% to $126.5 million. Adjusted EBITDA went up 57.6% to $49.7 million. Net profit after tax (NPAT) grew by 55.9% to $26.8 million.

COVID-19 physical retail effects saw growth accelerate for the ASX share in the second half of FY20. Gross sales, gross profit and adjusted EBITDA grew by 62.5%, 68.3% and 74.1% respectively.

The CEO and founder of Kogan.com, Ruslan Kogan, said with the FY20 report release: “There is a retail revolution taking place as more and more shoppers learn about the benefits of e-commerce. We’re seeing record numbers of first time customers, who then go on to make repeat purchases at a 40% faster pace than previously. For us this is a very exciting trend that shows that once customers learn about shopping online, they change their ongoing behaviour. Once someone discovers the benefits of online hopping, I struggle to see why they would ever go back to the old way of doing things. After almost 15 years of preparation, the revolution occurring in retail represents a significant opportunity for Kogan.com.”

Mr Kogan also referred to the benefit to the company of its growing number of people using its loyalty scheme: “The Kogan First community of members grew exceptionally during the second half, and importantly these loyal members on average purchase and save much more often than non-members, demonstrating loyalty to the platform, and also demonstrating the significant savings and other benefits available through the loyalty program.”

In Kogan.com’s most recent business update – being the month of August 2020 – active customers has grown to 2.46 million (up 12.8% from 30 June 2020). Year on year, gross sales grew 117%, gross profit went up 165% and adjusted EBITDA rocketed 466%.

The Kogan.com share price has gone up 166% by over the past six months.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 2 ASX shares that are growing profit very fast appeared first on Motley Fool Australia.

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