There are a number of great possible share investments on the ASX. There are at least two names that I believe could make compelling long-term investments next month.
Not every business is worth buying because of how expensive many businesses are right now.
However, there are some very high quality businesses that have really demonstrated they’re worth owning over the last year.
With the recent share price declines, I think the following two ASX shares are worth investigating:
Xero Limited (ASX: XRO)
Xero is a cloud accounting software provider for small and medium businesses around the world.
Every year it’s adding hundreds of thousands of subscribers across Australia, New Zealand, the UK and the US. It has growth aspirations in other areas around the world such as Canada.
All businesses need good accounting so they can see how their business is performing and so they can report what needs reporting to the government each period. Tax is one of the certain things in life after all. Governments increasingly want digital reporting, which Xero is a world leader in.
Xero has an extremely high gross profit margin – it’s almost 86%. When the company is eventually not investing so heavily for growth, it will be able to generate a lot of profit and cashflow.
Over the last two months the Xero share price has fallen by almost 20%.
Redbubble Ltd (ASX: RBL)
Redbubble is one of the leading e-commerce businesses on the ASX in my opinion.
It sells products that have been designed by artists like wall art, t-shirts and masks.
One of the great things about an e-commerce business is that once the digital infrastructure has been developed, a lot of the new revenue can fall straight to the profit lines (and generate good cashflow).
In the FY21 half-year result it doubled its cashflow to $80 million, and its gross profit grew much faster than the marketplace revenue growth. I think this shows that it can achieve even stronger operating leverage can occur as it gets bigger.
It’s now making a profit at the EBIT level (EBIT explained), where it was making a loss last year.
The ASX share keeps adding new product lines over time, such as masks, which increases its addressable market and relevancy to potential customers.
I’m not sure how big it can become, but it continues to grow revenue at a high double digit pace and it has its eyes on further growth.
The Redbubble share price is down 24% over the last month, so I think now could be an opportunistic time to buy shares.