Airtasker Ltd (ASX: ART), a prominent player in the online marketplace for local services, has faced a significant decline in its stock price, dropping 27% since 22 July. This steep drop raises questions about whether the company represents a compelling investment opportunity. Let's delve into why Airtasker could be an intriguing prospect for those interested in ASX growth shares.
A Platform with Promising Potential
Airtasker describes itself as Australia's leading online marketplace connecting individuals and businesses with those looking for work. The company's platform facilitates a wide range of tasks, from delivery and removal services to furniture assembly and photography. This broad scope provides a substantial growth runway, driven by the platform's ability to offer flexible earning opportunities.
Strong Revenue Growth
Airtasker recently reported its fourth-quarter results for FY24, highlighting impressive revenue growth despite a challenging economic backdrop. For the three months ending 30 June 2024, Airtasker's platform fee revenue surged by 13.9% to $34.1 million. Overall group revenue increased by 5.6% to $46.6 million. The introduction of a cancellation fee helped reduce cancellations by 26.3% year-over-year, contributing positively to the financial performance.
International markets are also showing promise. In FY24's fourth quarter, the UK saw a 34.9% increase in gross marketplace volume (GMV), reaching $3 million. Meanwhile, the US market experienced a 9.4% growth in GMV, totaling A$0.8 million. Although these markets are still relatively small, their rapid growth suggests significant potential for future expansion.
Impressive Profit Potential
Profitability is a crucial aspect of any investment, and Airtasker’s financials show strong potential in this area. In the first half of FY24, Airtasker achieved a gross profit margin exceeding 95%, one of the highest margins on the ASX. This high margin indicates that nearly all new revenue is converted into gross profit, providing ample resources for further growth initiatives, such as marketing and development.
The company also reported positive earnings before interest, tax, depreciation, and amortisation (EBITDA) of $0.6 million in the third quarter of FY24, reflecting a $1.5 million improvement compared to the previous year. With ongoing revenue growth, the potential for EBITDA to increase in FY25 appears strong, especially with recent media agreements that have secured an $11 million advertising budget to support revenue growth.
Robust Cash Flow Model
Airtasker operates with a capital-light business model, which reduces the need for significant investment in property or manufacturing. This efficient model supports scalable growth with relatively low capital requirements. In the third quarter of FY24, the company generated $2.5 million in free cash flow, marking a $5.1 million improvement from the previous year.
With $17.8 million in cash and term deposits at the end of the fourth quarter, Airtasker is well-positioned for future growth. This solid cash position provides the flexibility to pursue acquisitions or return cash to shareholders, further enhancing its appeal.
Airtasker Ltd presents a notable opportunity for those seeking growth stocks on the ASX. Despite the recent decline in its stock price, the company’s strong revenue growth, impressive profit margins, and robust cash flow model highlight its potential. As Airtasker continues to expand its platform and capture more market share, it could emerge as a compelling option for growth-focused investors.