This article is about 2 ASX shares to buy that are growing rapidly in the current environment. One of those picks is Redbubble Ltd (ASX:RBL).
The post 2 ASX shares to buy that are growing rapidly appeared first on The Motley Fool Australia. –
This article is about two ASX shares that are growing rapidly.
Here are those names:
Redbubble Ltd (ASX: RBL)
According to the ASX, Redbubble has a market capitalisation of $1.6 billion.
Redbubble has two online artist-produced marketplaces for various items like clothes, stationery, housewares, bags, wall art and so on. Those two marketplaces are Redbubble.com and TeePublic.com.
The ASX share is one that was recently named by Montgomery Investment Management’s Joseph Kim as potential winner. He said: “While Redbubble has clearly been a “stay-at-home” trade, we believe the business has the opportunity to emerge a longer-term structural winner from COVID-19 should it capitalise in the recent spike in user and customer interest as a result of recent lockdown measures.”
In FY20 it generated marketplace revenue of $349 million, which represented 36% growth. Gross profit went up 42% to $134 million and operating earnings before interest, tax, depreciation and amortisation (EBITDA) grew 141% to $15.3 million.
The growth has continued into the first quarter of FY21. The first three months of FY21 saw marketplace revenue grow 116% to $147.5 million, gross profit went up 149% to $64.5 million and it generated $22.1 million of earnings before interest and tax (EBIT). Redbubble also made $27.1 million of operating cashflow.
At the time of that quarterly update, Redbubble CEO Martin Hosking said: “The strategic priority for the group now is to ensure we extend the market leadership we have established. We intend to invest in the customer experience to improve loyalty and retention and ensure long-term higher levels of growth. The company has the resources to undertake the anticipated investments and the margin structure to ensure it can do so while remaining profitable.”
Temple & Webster Group Ltd (ASX: TPW)
According to the ASX, Temple & Webster has a market capitalisation of $1.1 billion.
Temple & Webster is a leading online retailer of furniture and homewares. It has over 180,000 products on sale from hundreds of suppliers. The products are sent directly from suppliers to the customer, which enables faster delivery times and reduces the need to hold inventory and also allowing a larger product range. The ASX share also has a private label range which is sourced directly by Temple & Webster from overseas suppliers.
In FY20 the company delivered revenue growth of 74% to $176.3 million. The growth accelerated during the year, with second half revenue jumping 96% and fourth quarter revenue rising 130% compared to the prior corresponding period.
Temple & Webster also said that it achieved accelerated operational leverage with 483% growth of EBITDA to $8.5 million and the adjusted EBITDA margin improved from 2.5% to 5.3% in FY20.
The management pointed out that while online sales went up 57% during the April to July period, Temple & Webster grew 150%. Management explained that it’s gaining increasing benefits of scale as it gets larger. It’s forging closer relationships with its suppliers as it becomes a more significant part of their business, which allows it to obtain stock security, better terms and exclusive product ranges. The ASX share is also investing in areas like technology and data, brand awareness and its private label products. Management said that the bigger it becomes, the better and stronger its proposition becomes, which is a virtuous cycle.
In FY21 year to date to 19 October, Temple & Webster said that it grew revenue by 138% and the FY21 first quarter EBITDA was $8.6 million, which was larger than the whole of FY20’s EBITDA. At the time of the update, October revenue growth was still above 100%.
Temple & Webster said that it’s committed to a high growth strategy to take advantage of the structural shift towards online, capitalising on both organic and inorganic opportunities.
According to Commsec, Temple & Webster is valued at 32x FY22’s estimated earnings.
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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 Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.