I think there are plenty of ASX growth shares that now look good value after a hefty market dislocation in 2022.
When interest rates go up it can have the effect of lowering share prices because the risk-free rate that investors can get from safe assets – namely government bonds – has gone up. This means shares seem less attractive.
The great thing about this is that prospective buyers of ASX growth shares can now get them at a much cheaper price.
Xero Limited (ASX: XRO)
Xero is a leading software provider for small and medium businesses – it provides accounting and other business software from a wider ecosystem with both its own software offerings and third-party providers.
I like that the business is investing heavily for growth by spending around a third of its operating revenue into product design and development, with a particular focus at the moment on product localisation, which makes me think that the ASX growth share can capture further market share in countries like the UK, Canada and South Africa.
The business is continuing to grow its average revenue per user (ARPU) and subscribers every year, which is translating into quick growth of Xero’s total lifetime subscriber value. FY22 was a good demonstration of this.
Some of the most attractive features of Xero is its very high gross profit margin and its very high retention rate of subscribers.
I think the business’ long-term focus will help it become a much bigger business than it is today, after falling around 50% in 2022.
Volpara Health Technologies Ltd (ASX: VHT)
Volpara is another of the leading ASX growth shares in my opinion. It offers software relating to breast screening, practice administration and risk analysis.
Its core market is the US where it has captured a market share of around 33% of US women who have a breast screening. This means at least one of its various products are used on the images. I think there is plenty of growth potential here as it is able to grow its ARPU where it sells more software to the practices. A big area of focus is risk analysis, where it aims to help women as early as possible, which gives them the best chance of success.
Another interesting area for the business is its small exposure to lung cancer screening. This doesn’t get as much focus as breast screening, but management think that it has just as much market potential in the long-term.
Volpara also has a very high gross profit margin, of more than 90%, so if it can just grow revenue at a good pace then it can quickly become a larger and more profitable business. It’s aiming to for cashflow breakeven status as quickly as possible.
