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Two ASX small-cap shares with excellent potential are what I would buy now

Two young boys wearing tennis rackets and caps shake hands over a tennis ten on a tennis court.

Image source: Getty Images

ASX technology shares have excellent growth potential because they can grow quickly while achieving high margins.

When we can identify ASX small-cap shares with good growth potential, we can hold them for the long term as they hopefully become a much bigger company.

While there will likely be volatility along the way, I’m excited about these two stocks.

Airtasker says it operates Australia’s “leading online marketplace for local services”.

It allows people and companies with tasks to find someone to complete them for a fee. Almost any job can be advertised on Airtasker, including cleaning, car work, delivery, various handyman tasks, furniture assembly, moving, teaching/lessons, martial arts, pet care and much more.

Airtasker is currently seeing solid earnings growth, while also investing in long-term growth.

The company has already developed its platform, so additional sales in Australia could be a real boost to long-term profitability. In the first half of FY24 results, the company reported a gross profit margin of around 95%, which is very high. It means that almost all of the company’s new revenue is converted into usable gross profit.

In the third quarter of FY24, the ASX small-cap share reported positive free cash flow of $2.5 million, an improvement of $5.1 million year-on-year. Airtasker market revenue increased 11.5% year over year to $10.1 million. I think new revenue will help Airtasker’s financial situation significantly.

Excitingly, the company is using the same strategies in the UK as in Australia to achieve success. In the third quarter of FY24, the number of tasks seconded by Britain grew by 49.1%. The UK market is much larger than Australia’s, so this ASX small cap share has a lot of potential there.

Adore Beauty Group Ltd (ASX: ABY)

Adore Beauty is an online retailer of beauty and health products. The company offers a portfolio of more than 270 brands and more than 13,000 products through its platform. The company says it has evolved into an integrated content, marketing and e-commerce retail platform.

The company has done well to grow app usage. Marketing to customers, offering app-only promotions, and content integration have benefits. The app and podcasts can reduce the cost of reaching customers and encourage them to increase order value and frequency.

Adore Beauty is also working to grow its own brands – AB Lab, Adore Beauty and Viviology – giving the company a way to grow revenue and get more value from a sale on its platform.

In its recent FY24 Q3 update, the ASX small-cap share showed some of its key metrics improving.

Revenue rose 8.9% to $45 million, repeat customers rose 6.4% to 514,000, active customers grew 2.4% to 811,000, and the mobile app accounted for 28% of total revenue (vs. 23% in the previous corresponding period). .

If sales continue to grow over time, I think this company can grow steadily as well.