Lower share prices make better buying for ASX tech shares in my opinion. It’s a pretty obvious statement, but I think it’s this time that will prove to be a good time for long-term buying.
While higher interest rates are meant to hurt share prices, the fall has happened and now they look like very good opportunities to me for the long-term.
With high profit margins, I believe these two ideas are strong contenders right now:
Xero Limited (ASX: XRO)
Xero is a leading provider of accounting and business administration services through the cloud/internet.
I believe Xero is one of the highest-quality ASX shares around. So the 45% fall we’ve seen this year makes it seem much better value now.
For me, the company is doing all the right things. It’s growing a global subscriber base, increasing revenue at a solid rate (despite its large size), re-investing heavily for growth and achieving a high gross profit margin (it’s getting closer to 90%).
While it’s hard to know exactly how profitable the ASX tech share is when it’s investing so hard (and profit is close to $0), I think the underlying financials are actually extremely profitable, which we saw a glimpse of during COVID-19.
With global growth ahead, I think this business has got plenty of potential ahead at today’s lower Xero share price.
Volpara Health Technologies Ltd (ASX: VHT)
Volpara is a leading business in the healthcare technology space. It aims to detect breast cancer as early as possible for patients. Its software provides clinicians feedback on breast density, compression dose and quality, enabling them to give personalised and enhanced risk assessment.
The FY22 result demonstrated the financial strength of the business. It has a market share of around 35.5% of US women having a Volpara product applied on their images and data, up from 32% in FY21.
Volpara’s gross profit margin is 91%, meaning that the total revenue growth of 32% to NZ$26.1 million comes at a high margin.
The company continues to invest more in marketing, product research and development, which will help its growth over time.
I see good potential for the ASX tech share to sell more products to more clients in the US, which will help ramp up the average revenue per user (ARPU). There’s also the long-term potential for the company to grow in Europe with its breast screening offering.
The company also has a small, but growing, lung cancer screening segment. This could be an opportunity as large as breast cancer in the years ahead.
Volpara also recently announced a deal with Radnet, where it will implement Volpara Analytics and Volpara Risk software throughout its organisation. This is expected to be “material” for the company.
These are two of my favourite ASX growth shares right now and they look much better value. The Volpara share price is down 45% in 2022.