Day: January 29, 2021

2 ASX shares that are growing rapidly

asx growth shares

There are some ASX shares that are growing revenue and profit rapidly.

Many investors look at revenue and profit growth as measures as how to value a business.

Here are two of the fastest-growing companies right now:

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is an online-only furniture and homewares retailer. It has over 180,000 products on sale from hundreds of suppliers. It operates a drop-shipping model, where products are sent directly to customers from suppliers which enables faster delivery times and reducing inventory requirements and also allowing a larger product range.

The ASX share also has a private label range which is sourced directly by the company from overseas suppliers.

In FY20 the company achieved full year revenue growth of 74% to $176.3 million. As online shopping accelerated during the 2020 calendar year, so did Temple & Webster’s revenue. Second half revenue was up 96% and fourth quarter revenue went up by 130%. Active customers went up by 77%.

Earnings before interest, tax, depreciation and amortisation (EBITDA) went up by 483% to $8.5 million because of operational leverage. The adjusted EBITDA margin improved from 2.5% to 5.3%.

Management explained that the strong result, combined with the negative working capital nature of the business model allowed it to finish FY20 with $38.1 million of cash.  

The company said at its annual general meeting (AGM) that it’s making larger investments in areas such as technology and data, brand awareness and private label products. It can produce more content by having more creative resources. The ASX share said that the bigger it becomes, the better and stronger its customer proposition becomes, which it described as a virtuous cycle.

In terms of growth in FY21, the latest insight the market has is Temple & Webster’s trading update to 19 October 2020 which showed that revenue was up 138%. FY21 first quarter EBITDA was $8.6 million, which was more than the whole of FY20. October revenue growth was more than 100%. Temple & Webster’s contribution margin continued to run ahead of its 15% target.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an ASX share that specialises in digital donation tools for large and medium US churches.

Growth has accelerated over the last 12 months during the COVID-19 pandemic.

In FY20 Pushpay reported that its operating revenue increased by 33% to US$127.5 million with total processing volume growing by 39% to US$5 billion.

In the FY21 half year result, operating revenue grew by another 51% to US$86.6 million. The ASX share said it expects to see continued revenue growth as the business executes on its strategy, achieves increased efficiencies and gains further market share in the US faith sector. Half-year total processing volume went up by 48% to US$3.2 billion.

Pushpay boasted that its diligent approach to optimising the gross margin continues to drive pleasing results. In the FY21 half-year result its gross margin improved from 65% to 68%.

Operating expenses only grew by 16% in the period, compared to operating revenue growth of 53%. Operating leverage improved because of the revenue growth, further margin improvements and disciplined cost management. Pushpay is expecting significant operating leverage to accrue as operating revenue continues to increase while total operating expense growth remains low.

In the half-year result, the earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin jumped from 17% to 31%. Net profit after tax (NPAT) went up 107% and operating cashflow rose 203%.

The ASX share recently increased its EBTIDAF guidance for FY21, to a range of US$56 million to US$60 million. This would represent an increase of more than 100% over the year.

At the current Pushpay share price, it’s valued at 20x FY23’s estimated earnings according to Commsec.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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2 fantastic blue chip ASX shares to buy

asx blue chip shares represented by pile of blue casino chips in front of bar graph

If you want to construct a balanced portfolio, having a few blue chip ASX shares in there would be a smart move.

But with so many to choose from, it can be hard to decide which ones to buy.

To narrow things down for you, I have highlighted two ASX blue chip shares that come highly rated:

BHP Group Ltd (ASX: BHP)

The first blue chip ASX share to look at is BHP. The Big Australian is one of the world’s largest miners and owns a diverse portfolio of world class and low cost operations across the globe.

BHP has exposure to a wide range of commodities, but chief among them is iron ore. Which certainly is a good thing right now with iron ore prices at such sky high levels. It is thanks largely to this that the company is being tipped to deliver a bumper profit result in FY 2021.

Ord Minnett is very positive on the mining giant and recently put a buy rating and $52.00 price target on its shares.

Its analysts believe the company is well-placed to outperform in the post-COVID environment. It expects this to lead to generous dividend payments.

Sonic Healthcare Limited (ASX: SHL)

Another blue chip to look at is Sonic Healthcare. It is a leading medical diagnostics company with operations across the world.

Sonic has been a very impressive performer in FY 2021. In October it released its first quarter update and revealed a 29% increase in revenue to $2,144 million and a massive 71% lift in EBITDA to $580 million.

This growth has been driven largely by strong demand for COVID-19 testing services. But also by positive performances across the rest of the business. 

Credit Suisse is a fan of the company. Earlier this month, the broker put an outperform rating and $39.00 price target on Sonic’s shares. It believes the company will outperform consensus estimates in FY 2021, especially if COVID-19 cases remain high globally and the strong demand for testing continues.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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2 ETFs to buy for strong diversification

Exchange Traded Fund (ETF)

There are some exchange-traded funds (ETFs) that may be able to give investors strong diversification for their portfolios.

ETFs allow you to invest in a whole basket of shares with just one trade, so it can be very helpful for creating diversification quickly.

Here are two options that give Aussies diversification from a typical ASX share portfolio:

Vanguard MSCI Index International Shares ETF (ASX: VGS)

The idea of this ETF is to give exposure to most of the world’s biggest companies across many of the major developed countries.

It has over 1,500 positions so it is very diversified in terms of the number of holdings that it has.

Vanguard MSCI Index International Shares ETF is invested across a variety of industries. It has significant exposure to information technology (22.5% of the portfolio), health care (13%), financials (12.3%), consumer discretionary (12.3%) and industrials (10.6%).

Due to the fact that most of the world’s biggest companies are listed in the US, it’s not surprising that just over two thirds of the portfolio is allocated to US businesses. But remember, many of those US companies generate their earnings from many countries. Other countries are also represented in the portfolio, Japan has an 8% allocation, the UK has a 4.4% allocation, France has a 3.5% allocation, Canada has a 3.1% weighting, Switzerland has a 3% allocation and Germany has a 3% weighting. Other countries are represented with weightings smaller than 3%. 

In terms of the actual largest positions, the biggest five are: Apple, Microsoft, Amazon, Alphabet (Google) and Facebook.

It has a pretty low cost with an annual management fee of 0.18% per annum.

The longer-term returns of the ETF have been above 10%. Over the past three years it has delivered average net returns per annum of 11.3%. Since inception in November 2014, it has made average returns per annum of 12%.

Betashares Asia Technology Tigers ETF (ASX: ASIA)

This ETF is about giving investors exposure to the 50 largest technology shares in Asia, outside of Japan.

BetaShares says that due to its younger, tech-savvy population, Asia is surpassing the West in terms of technological adoption and the sector is anticipated to remain a growth sector. The ETF provider also said that this investment gives diversified exposure to a high-growth sector that is under-represented in the Australian share market, and a complement to investors with US technology exposure.

The businesses in this ETF are spread across a variety of sectors including e-commerce, semiconductors, cloud computing, home entertainment and so on.

Its largest positions include Samsung, Taiwan Semiconductor Manufacturing, Tencent, Meituan, Alibaba, Pinduoduo, JD.com, Netease, Infosys and Sea.

Betashares Asia Technology Tigers ETF is more expensive in annual costs terms with management fees of 0.67% per annum, but the net returns have also been stronger than the Vanguard one.

Over the past year Betashares Asia Technology Tigers ETF has made a net return of 62%. Since inception in September 2018, the ETF has made average returns per annum of 33.5%. Looking at the index which it tracks, over the past five years the index has made returns of 24.6%.

According to BetaShares, the price / earnings ratio (P/E) of this ETF at 31 December 2020 was 34.3x.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

More reading

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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5 of the best ASX shares to buy in February

ASX shares to buy in February

With a new month upon us, now could be a good time to look if there are any additions that could take your portfolio to the next level.

But which ASX shares should you buy? Here are five that are rated as buys:

Adore Beauty Group Limited (ASX: ABY)

Adore Beauty is Australia’s number one pureplay online beauty retailer with almost 600,000 active customers. It currently has an estimated ~$11 billion a year opportunity in the Australian beauty and personal market, which is materially more than the revenue of $158.2 million it expects to generate in 2020. This gives it a long runway for growth over the 2020s. Morgan Stanley currently has an overweight rating and $8.35 price target on the company’s shares.

Altium Limited (ASX: ALU)

Altium is a printed circuit board (PCB) design software provider. It is a leading player in the electronic design industry and is now aiming to take things to the next level by dominating it. The key to this is its cloud-based Altium 365 product, which management expects to help it achieve its target of doubling its subscriber numbers to 100,000 and increasing its revenue by ~150% to US$500 million by 2026. Credit Suisse is positive on the company and has an outperform rating and $35.00 price target on its shares.

Appen Ltd (ASX: APX)

Appen is a leading developer of high-quality, human annotated datasets for machine learning and artificial intelligence (AI). It has a team of one million+ contractors preparing the data for the models of some of the largest tech companies. Demand has softened this year because of the pandemic, but management is confident it will rebound once the crisis passes. Macquarie has an outperform rating and $27.00 price target on its shares.

CSL Limited (ASX: CSL)

CSL is one of the world’s leading biotechnology companies. It is home to CSL Behring, the global number one player in the plasma therapies industry, and Seqirus, which is the number two player in the global influenza vaccines industry. Its shares have come under pressure in FY 2021 due to concerns about plasma collection headwinds (these are a vital ingredient in many of its therapies). However, analysts at UBS believe this is a buying opportunity and have recently put a buy rating and $346.00 price target on its shares.

Pushpay Holdings Group Ltd (ASX: PPH)

Pushpay is a donor management and community engagement platform provider with a focus on the faith sector. In FY 2020 the company reported a 32% increase in operating revenue to US$129.8 million. Management is expecting similarly strong growth again in FY 2021. The good news is that this is still only a fraction of its long term target. Management is aiming to win a 50% share of the medium to large US church market, which is estimated to be a US$1 billion revenue opportunity. Goldman Sachs is a fan of Pushpay and has a conviction buy rating and $2.59 price target on its shares.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

More reading

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 CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of Altium and Appen Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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