The Pushpay share price is up 70% in 2020: Why I would still invest

The Pushpay Holdings Ltd (ASX: PPH) share price continued its positive run on Tuesday and raced to a record high of $6.54 this morning.

When the donor management system provider’s shares reached that level, it meant they were up around 70% since the start of the year.

Why is the Pushpay share price at a record high?

Investors have been fighting to get hold of the company’s shares since the release of a very strong full year result release last week. 

That result revealed that Pushpay has continued its meteoric growth in 2020 despite the global coronavirus pandemic.

For the 12 months ended March 31, the company reported a 33% increase in operating revenue to US$127.5 million.

This was driven by a 39% increase in total processing volume to US$5 billion, a 42% lift in customer numbers to 10,896, and flat average revenue per user of US$1,317 per month.

But perhaps most impressive was the operating leverage it achieved during the 12 months.

Its operating revenue may have grown 33% during the 12 months, but its operating expenses needed to only lift by 5% to achieve this. As a result, as a percentage of operating revenue, its operating expenses reduced from 65% to 52%.

This ultimately led to the company reporting a whopping 1,506% increase in earnings before interest, tax, depreciation, amortisation and foreign currency gains/losses (EBITDAF) to US$25.1 million.

What about the future?

More of the same is expected in FY 2021 despite the pandemic. In fact, you might argue that the pandemic is accelerating the adoption of its technology and therefore its growth.

Management notes that church closures have led to a clear shift to digital, with customers utilising its mobile first technology solutions to communicate with their congregations.

In light of this and its expectation of achieving further operating leverage, management has provided EBITDAF guidance of between US$48 million and US$52 million. This represents a 91.2% to 107% increase, respectively, year on year.

But it doesn’t expect its growth to stop there. Management is aiming to grow its share of the medium and large church market to 50% in the future.

This represents a US$1 billion opportunity and is many multiples the US$127.5 million it achieved in FY 2020.

Based on its current EBITDAF margin (which is likely to expand in the future as it scales), US$1 billion in revenue would equate to EBITDAF of ~US$197 million. Once again, this is many times more than the US$25.1 million it achieved this year.

Due to the quality of its offering and its strong market position, I feel confident the company will achieve this target during the 2020s.

In light of this, I think Pushpay is a tech share to buy and hold for the long term along with Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX).

More reading

• 3 ASX growth shares to buy immediately with $3,000
• 3 ASX tech shares to buy and hold until at least 2030
• These are the star ASX shares of the week
• 3 star ASX shares to buy for the rest of 2020
• 3 ASX shares that could set you up for life

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of Altium and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post The Pushpay share price is up 70% in 2020: Why I would still invest appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2YUb1Jq