I believe the tech sector is a great place to look for long term investment options. This is particularly the case at the mid cap side of the sector, where there are a number of companies which could grow materially in the future.
Two that I would consider buying are listed below. Here’s why I’m a fan:
ELMO Software Ltd (ASX: ELO)
The first ASX tech share to look at is ELMO Software. It is a growing cloud-based human resources and payroll software company which provides a unified platform to streamline a wide range of processes. It recently released its full year results and revealed annualised recurring revenue (ARR) of $55.1 million and statutory revenue of $50.1 million. This was a 19.7% and 25% year on year increase, respectively, which I thought was very strong given the pandemic.
The good news is that management is confident this strong form can continue in FY 2021. It has provided guidance for ARR of between $65 million and $70 million this financial year. This represents year on year growth of 18% to 27%. However, it is worth noting that this guidance is purely organic and is likely to be boosted greatly by acquisitions. ELMO has a cash balance of $140 million that it intends to deploy for acquisitions in the near future. Looking further ahead, I believe the company has a massive opportunity in new geographies for its jurisdiction agnostic platform.
Nearmap Ltd (ASX: NEA)
Another ASX tech share to consider buying is this aerial imagery technology and location data company. Over the last few years Nearmap has been growing its recurring revenues at a strong rate thanks to increasing demand for its services in both the ANZ and North American markets.
And while its growth has slowed in FY 2020 because of some large churn events, I’m confident that it will accelerate again once the coronavirus crisis passes. Especially given its material opportunity in a highly fragmented market and its high quality product offering. This has been bolstered by an artificial intelligence product which looks like it has the potential to be a game changer. Overall, I think Nearmap shares would be great long term options.
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More reading
- Are these ASX small cap shares heading for big things?
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- Leading brokers name 3 ASX shares to buy today
- Here’s the best mid-cap growth share to buy on the ASX
- These are the 10 most shorted shares on the ASX
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended Elmo Software and Nearmap 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.
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