ASX shares with high gross profit margins might have an advantage when it comes to growing profit and producing shareholder returns.
Having a high profit margin can suggest it’s a quality, very scalable business:
Airtasker Ltd (ASX: ART)
Airtasker is a business where someone needs a job doing and the business can find a ‘tasker’ willing to do it for a fee. There are wide range of potential jobs, from furniture assembly to painting to accounting services.
In its prospectus, the ASX share said that its gross profit margin was 93% in FY20. The only costs at that stage are the merchant/payment fee to Stripe to process payments and insurance costs paid for third party public liability insurance.
Combine that high gross profit margin with the rapid top line growth of the business and you get a strong combination.
Yesterday, the business reported that its FY21 gross marketplace volume (GMV) of $153.1 million exceeded the prospectus forecast of $143.7 million and the upgraded guidance of between $148 million to $152 million.
Airtasker is also hoping to grow in the US and UK in key city markets. The company appears to have a sizeable growth runway.
Volpara Health Technologies Ltd (ASX: VHT)
Volpara is a health technology business that provides software for breast screening, as well as enterprise-wide practice management software that helps with productivity, compliance, reimbursement and patient tracking.
In FY21 it had a gross profit margin of 91%, up from 86% in FY20.
Volpara has a market share of around a third in the US where at least product is used with a US breast screening.
The ASX share is seeing a lot of growth. Volpara’s FY21 annual recurring revenue (ARR) increased 60% to US$18.6 million, which included 20% organic growth year on year.
One of the main statistics that Volpara is looking to grow its its average revenue per user (ARPU), or per screen. The integrated product suite will/could sell for up to US$10 per screen. The ARPU in FY21 was US$1.40. Average ARPU in the fourth quarter of FY21 was US$2.50 due to the most new customers buying more than one product.