May 2022 could be a great month to look at some ASX growth shares that have been sold off but have plenty of growth potential.
It has been a rough time for plenty of ASX shares since the beginning of 2022 with all of the volatility because of inflation, interest rates and the Russian attack on Ukraine.
I think there are some businesses that look attractive right now, like these two:
Airtasker Ltd (ASX: ART)
The Airtasker share price has dropped more than 60% in the last 12 months.
But I think it’s well-suited to the current environment.
There may be a lot of inflation at the moment, but if the tasks on Airtasker increase in price over time, then the ASX growth share could benefit if it takes the same cut in percentage terms. Inflation may not be an issue for Airtasker’s revenue, it could help things.
I believe that Airtasker has lots of growth potential because of the fact that it’s growing so quickly in the US and UK. These are exciting markets, in my opinion.
Something else to keep in mind with Airtasker is that it can generate (and is generating) positive cashflow. This means the company can fund its own growth without burning through its balance sheet.
One of the great things about the company is its gross profit margin of more than 90%. That means a very high proportion of the new revenue it makes can translate into new gross profit, when can then be largely spent on more growth activities.
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is another business which has suffered a significant fall in recent times.
In one year, the Adore Beauty share price is down around 65%.
However, I’ve been impressed by the ASX growth share’s ability to continue its growth in FY22 despite facing very strong growth numbers 12 months prior.
In the third quarter of FY22, Adore Beauty reported 9% revenue growth, 7% active customer growth and 47% growth of returning customers.
The company is working hard on its ‘owned’ channels of marketing such as its app, podcasts and YouTube channel. This allows the ASX growth share to connect with customers for a low cost and in a very scalable way.
Adore Beauty claims that beauty, especially skincare, is unique within the broader retail market and is “resilient to economic challenges”. Its customers use those products daily, they consider the items essential and frequently re-purchase. Returning customers typically contribute more than 70% of total revenue.
The ASX growth share continues to invest for sustainable growth in an industry that’s worth over $10 billion and rising in Australia.
Launching private label brands is a smart move, as it can utilise its powerful platform to reach customers, while also benefiting from a higher profit margin. The first product is expected to be launched soon.