Category: Stock Market

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

There are few companies in the world tied to consumers’ financial health the way Mastercard (NYSE: MA) is. It processes an incredible $6.3 trillion worth of transactions each year and therefore can be really sensitive to economic shocks that result in less consumer spending. The COVID-19 pandemic was probably as significant a shock as Mastercard could expect to see, but looking back, the company didn’t perform too badly.

With a market capitalization of $372 billion at Wednesday’s prices, Mastercard’s stock trades near all-time highs. However, its recent gains owe more to multiple expansion than earnings growth. Right now, the stock trades at a significant 58 times trailing-12-month earnings. That’s a little skewed because of the effects of the pandemic — but the stock is richly priced based on expected earnings for 2022, too. If you’re a Mastercard investor, what should you make of this valuation?

The everything business

Investors are clearly willing to pay higher valuations for Mastercard as time progresses, and perhaps one of the reasons is because it has never been truly disrupted. The reality is, it’s integrated with almost every bank in the world, and they have issued over 2.8 billion of the company’s cards to consumers as of December 2020. It will be extremely difficult for new entrants to unseat such a dominant position, although new direct payment technologies like “Buy Now, Pay Later” are giving it a shot. Ultimately, the main competitor it has is Visa. 

Year	Total Mastercard Payment Volume
2017	$5.2 trillion
2018	$5.9 trillion
2019	$6.5 trillion
2020	$6.3 trillion

Data source: Company filings.

Gross payment volume was growing nicely until the pandemic struck, although the effects were probably a lot smaller than expected in the early moments of 2020. Payment volume has returned to growth, though, with the first-quarter 2021 earnings report showing $1.7 trillion, up 8% compared to the same time last year. If that level remains consistent throughout the year, Mastercard stands to grow compared to both 2020 and its peak in 2019.

Emerging financial technology companies like Affirm have tried to bypass both Mastercard and the big banks, integrating directly with online merchants to facilitate payments (plus providing financing to customers). While very popular with consumers, this model so far has failed to generate meaningful profits, and some players — like Australian company ZipPay — have even partnered with Mastercard to deliver ”digital credit cards” for their customers. So even as disruptors enter the payments scene, it turns out they greatly benefit from Mastercard’s services and become customers as much as competitors. 

Truly global

The U.S. makes up just 31% of Mastercard’s total net income — it’s a truly global business. Over $4.3 billion of the company’s $6.4 billion is derived worldwide, so it puts the effects of the pandemic into perspective. For the full year 2020, Mastercard’s cross-border transaction volume declined by a significant 29%, as less consumers could travel on account of border closures around the world.

In the first quarter of 2021, the company reported cross-border volumes down 17%, which is an improvement but still markedly suppressed. The issue going forward is whether consumers will be able to move around the world during the U.S. and European summer — and more importantly, whether they actually want to. Vaccination programs are ramping up, but countries like Italy are still under substantive lockdowns domestically and are only just preparing to welcome tourists later in May.

With no opportunity to prepare or plan summer holidays, it remains to be seen if popular destinations will attract tourists, which would really impact Mastercard’s ability to climb out of the cross-border volume crater left by COVID-19. Losing another summer could really stifle Mastercard’s hopes for an earnings rebound. 

The bottom line

Mastercard has been consistently trading at an earnings multiple near 40, which is understandable given the powerful growth rate in earnings per share. 

Calendar Year	Earnings Per Share (Fully Diluted)	Share Price*	Multiple*
2017	$3.65	$168.70	46.2
2018	$5.60	$211.05	37.7
2019	$7.94	$316.50	39.9
2020	$6.37	$316.55	49.7
As of May 5, 2021		$375.00	57.7 (2020 earnings)
2021	$7.92 (estimate)	$375.00	47.3
2022	$10.44 (estimate)	$375.00	35.9

Data source: Calculated by author using company filings. *Share price and multiple captured on Jan. 31 following the respective full-year earnings reports. Estimated 2021 and 2022 earnings from Yahoo! Finance.

Looking at 2021 and 2022 estimates, the company seems fairly valued for the next two years unless it manages to blow out analyst expectations. This leaves some risk to the downside if it fails to meet them, so investors might be considering their risk versus reward when buying the stock at these levels. 

Mastercard’s not the only payments provider with a slightly rich valuation, and this is likely the effect of ultra-low interest rates buoying the entire sector as the cost of money remains suppressed. 

Visa trades at 48 times earnings for the past 12 months, and 37 times consensus estimates for the next 12 months. Visa is a bit bigger than Mastercard, with a roughly $508 billion market cap and $11.6 trillion in gross transaction volume in 2019 (pre-COVID), with 3.4 billion cards issued. However, the companies operate very similar business models.

American Express, while in the same business as Visa and Mastercard, operates with a very different model. It issues cards directly to consumers rather than solely to third parties, and it also provides credit products. While still a large company at $125 billion, it attracts a lower current earnings multiple of 25 times trailing earnings and just 23 times forward estimates. The market typically attributes higher risk to finance companies, as they could pose significant downside during an adverse credit event. 

Looking ahead

Considering the historical valuation of Mastercard, and the fact that it seems close to fully valued through 2022 (assuming earnings estimates prove accurate), investors may want to think about the potential upside versus the opportunity cost of putting money elsewhere. While interest rates are low, which has boosted consumer spending, they could rise as the broader economy heats up.

For the company to deliver meaningful share price growth over the next two years, it might need to materially beat analyst expectations on earnings, through organic growth or increased market share. Without that, the stock could stagnate, and investors would need to be patient.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• 650,000 Aussies sign up for Afterpay (ASX:APT) Mastercard
• ASX stock of the day: EML Payments (ASX:EML) shares keep rising

Anthony Di Pizio 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 Mastercard and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has recommended Mastercard. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Has Mastercard’s stock gone too far, too fast? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Galaxy Resources Ltd (ASX: GXY), Orocobre Ltd (ASX: ORE) and Pilbara Minerals Ltd (ASX: PLS) dominate the lithium scene on the ASX. However, there are a number of small cap ASX lithium shares with big plans to begin production in the near term. 

The next up and coming ASX lithium shares 

Core Lithium Ltd (ASX: CXO) 

Core Lithium is in the advanced exploration stages for its Finniss Lithium project. The company is continuing its drilling campaigns to increase mineral resources, mine life, and project revenues. Core Lithium is also targeting the completion of an optimised definitive feasibility study in 2Q21. This will be conducted ahead of a final investment decision followed by plant construction. 

On 5 May, the company announced a major lithium exploration and resource drilling push at Finniss. Core Lithium managing director Stephen Biggins said: 

We are about to launch the largest exploration and resource drilling campaigns in the Company’s history with the aspiration of more than doubling Core’s Lithium Resources and Finniss Project’s Life of Mine.

From an offtake perspective, the company has secured a number of agreements. Furthermore, these agreements account for approximately 85% of its first three years of annual spodumene production. More recently, the company also announced that its largest shareholder and key Tesla supplier, Yahua, had planned to double its lithium hydroxide output. 

Piedmont Lithium Ltd (ASX: PLL) 

Piedmont follows a similar timeline as Core Lithium. However, a number of exploration updates are required before the final financing and construction phases. 

For the remainder of the calendar year, the company expects to deliver additional mineral resource updates. In addition, it will deliver an integrated scoping study update and an integrated definitive feasibility study. Should everything go to plan, the company should be eyeing the construction of its integrated project by the beginning of 2022.

Piedmont is well funded for its upcoming updates with a recent successful listing on the US market. This bolstered the company’s cash position to $167 million for the March quarter. 

More reading

• Tesla boss: ASX lithium shares set to boom
• Why the Galaxy (ASX:GXY) share price rocketed 55% higher in April
• Why the Piedmont Lithium (ASX:PLL) share price is sliding 7% today
• Why ASX lithium shares like Orocobre (ASX:ORE) soared in April
• The Core Lithium (ASX:CXO) share price jumped over 11% today

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Catapult Group International Ltd (ASX: CAT) share price is trading lower today.

In morning trade, the sports analytics and wearables company’s shares are down 1.5% to $1.99.

Why is the Catapult share price trading lower?

The Catapult share price has come under pressure today despite the release of a positive trading update this morning.

According to the release, the company’s Software-as-a-Service (SaaS) metrics have been improving during the second half of FY 2021.

Management advised that the highlight was a $3.9 million increase in Annual Contract Value (ACV) over the three-month period ended March 31 2021. This equates to an annualised increase of 34.6%.

Catapult advised that this was achieved after sports gradually returned to play. Which is consistent with management’s belief that the short-term impact of COVID-19 would not lower medium-term growth rates.

The growth in ACV, the key SaaS metric used by Catapult to measure growth, over the 12-month period was 16.5%.

Where is its growth coming from?

The release explains that its ACV growth was driven largely by the core Performance & Health software solutions. This was predominantly in the EMEA and APAC regions, which grew 57% and 34%, respectively, on a year-on-year basis.

Management notes its overall growth was delivered despite the pandemic still proving a significant factor in the North American sports market. This restricted ACV growth in Catapult’s largest market to a very modest 5% over the 12 months. This could explain some of the weakness in the Catapult share price today.

Another positive from the update was that its ACV Churn has remained at “world-class SaaS levels” of 5.5%. Management believes this demonstrates the resilience of Catapult’s software products through the pandemic and how they remain critical to its customers’ daily workflows.

Finally, Catapult revealed that it has achieved a strong improvement in cross-selling during the March quarter. This led to the number of multi-solution customers increasing at an annualised rate of 18.3% since the end of December. Though, Lifetime Duration fell modestly, reflecting the increased ACV from recently signed new customers.

Management commentary

Catapult’s CEO, Will Lopes, said: “I was very pleased with the results of this past quarter. Catapult achieving an annualized ACV growth rate of 35% is in line with my expectation of a high-growth SaaS business. I have always been confident in our long-term potential of delivering ACV that is 10x our current size. The pandemic presented challenges to our growth rate, which will continue to impact us in the short term.”

“However, as sports return to play, as we’ve seen in EMEA and APAC, Catapult remains well-positioned to capitalize on its long-term potential. We see this quarter’s annualized ACV growth rate being in line with our sustainable medium-term ambitions, once the impact of the pandemic is behind us,” he concluded.

Depsite today’s decline, the Catapult share price is still up 75% over the last 12 months.

More reading

• Fund managers have been buying Webjet (ASX:WEB) and this ASX share

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 Catapult Group International Ltd. The Motley Fool Australia has recommended Catapult Group International Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Catapult (ASX:CAT) share price falls despite delivering solid Q3 growth appeared first on The Motley Fool Australia.

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The Eclipx Group Ltd (ASX: ECX) share price is rocketing higher on Thursday morning.

At the time of writing, the salary packaging and fleet management company’s shares are up 10% to $2.18.

Why is the Eclipx share price rocketing higher?

The catalyst for the rise in the Eclipx share price today has been the release of its half year results.

For the six months ended 31 March, Eclipx reported net operating income of $105.9 million, up 22% compared to prior comparative period. A key driver of this growth was the more than doubling of its end of lease income. This was driven by ongoing positive trends in the used vehicle markets in both Australia and New Zealand.

Also supporting its growth was an 11% half on half increase in new business writings (NBW). However, despite a record sales order pipeline, NBW is expected to continue to be constrained by global new vehicle supply shortages.

Thanks to improvements in its margins, earnings before interest, tax, depreciation and amortisation (EBITDA) rose 43% to $66.5 million. Even better, though, was that its net profit after tax and amortisation (NPATA) jumped 77% to $39.3 million.

At the end of the period the company had net corporate debt of $54 million. This is down 62% year on year from $144 million.

The company also revealed that its assets under management or financed (AUMOF) reduced by 7% compared to the prior corresponding period. This reflects the lower NBW since the emergence of COVID-19 and a 79% increase in lease extensions.

No dividend

Eclipx will not be paying a dividend again. Instead, it intends to return funds to shareholders via a ~$20 million on-market share buy-back in the second half.

It believes this is the most efficient form of capital distribution to shareholders, in the absence of distributable franking credits.

Outlook

Management’s cautious outlook for the remainder of FY 2021 couldn’t hold back the Eclipx share price today.

It warned: “Globally, the supply chain disruption for new vehicles is expected to continue for some time. While this situation remains, new vehicle deliveries, and therefore NBW and AUMOF, are likely to be constrained beyond our initial June 2021 expectations.”

“When the new vehicle supply chain normalises, the Group expects a return to solid asset growth, reflective of the combined strength of our current order pipeline, of recent tender wins, of new and current client activity, and as we implement our “Strategic Pathways” plan. In the near-term, whilst the new vehicle supply chain remains constrained, we expect End of Lease income to continue to be above pre-COVID levels.”

More reading

• Here’s why the SeaLink (ASX:SLK) share price is charging higher today
• Qantas (ASX:QAN) share price lower on ACCC update
• The Strike Energy (ASX:STX) share price is on watch today. Here’s why
• Why the Regis Resources (ASX:RRL) share price is in focus
• 1 number you might have missed from Amazon’s earnings

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

The post Why the Eclipx (ASX:ECX) share price is rocketing 10% higher today appeared first on The Motley Fool Australia.

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The SeaLink Travel Group Ltd (ASX: SLK) share price is charging higher on Thursday morning.

At the time of writing, the travel and transport company’s shares are up 3.5% to $10.18.

Why is the SeaLink share price charging higher?

Investors have been buying the company’s shares this morning following the release of an acquisition announcement.

According to the release, SeaLink has entered into binding agreements to acquire 100% of the Western Australia-based Go West Tours for an enterprise value of $84.7 million. The deal also includes an earnout component of up to $25 million. In addition to this, SeaLink revealed that it will purchase strategic property assets comprising three depots for $3.8 million.

The deal will see the company pay an upfront consideration of $72.4 million on completion, a deferred contingent consideration of $16.1 million payable in equal tranches over two years (provided current earnings levels are maintained in FY 2022 and FY 2023), and an earn-out consideration up to $25 million. The latter is based on exceeding specific financial hurdles over the period to 30 June 2023.

Management advised that the acquisition will be funded from existing cash reserves and existing undrawn senior debt facilities. It expects the deal to be high single-digit earnings per share accretive in the first full year.

What is Go West?

The release explains that Go West is one of the largest specialist bus operators serving the resources sector in Western Australia. It has a modern bus fleet of approximately 287 buses across 9 depots and approximately 181 employees.

Management notes that Go West has enjoyed strong growth in recent years. It has won multi-year contracts with leading mining companies and other regional services such as school bus transfers.

The bus operator generated approximately $46.2 million of revenue in the 12 months to 30 September 2020 and maintains an attractive tender pipeline of new contract opportunities in the state.

SeaLink’s Chief Executive Officer, Clint Feuerherdt, said, “The acquisition of Go West provides SeaLink with a unique opportunity to expand into a new market that is highly complementary to our existing Australian bus transport capabilities.”

“Go West has valuable contract counterparties and delivers an essential service for these clients. The operations of Go West were unaffected by the COVID-19 pandemic and continued at near 100% levels throughout, keeping their communities and worksites connected.”

“The Go West team has built a high-quality business focused on providing great service whilst maintaining high safety standards for their clients. Our intention is to retain the well-recognised and established Go West brand and continue to work with, and support, Go West’s existing client base. We are very excited about the growth opportunities this acquisition provides SeaLink and look forward to welcoming all of Go West’s employees to the Group,” he concluded.

More reading

• Why the Eclipx (ASX:ECX) share price is rocketing 10% higher today
• Qantas (ASX:QAN) share price lower on ACCC update
• The Strike Energy (ASX:STX) share price is on watch today. Here’s why
• Why the Regis Resources (ASX:RRL) share price is in focus
• 1 number you might have missed from Amazon’s earnings

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

The post Here’s why the SeaLink (ASX:SLK) share price is charging higher today appeared first on The Motley Fool Australia.

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The Qantas Airways Limited (ASX: QAN) share price is under pressure on Thursday morning.

At the time of writing, the airline operator’s shares are down 1% to $4.76.

Why is the Qantas share price trading lower?

The Qantas share price is trading lower today after the Australian Competition & Consumer Commission (ACCC) revealed that it plans to deny the Qantas-Japan Airlines coordination proposal.

According to the release, the ACCC is proposing to deny authorisation for the two airlines to coordinate flights between Australia and Japan for three years under a proposed five year joint business agreement.

The ACCC’s Chair, Rod Sims, explained: “An agreement for coordination between two key competitors breaches competition laws. The ACCC can only authorise these agreements if the public benefits from the coordination outweigh the harm to competition. At this stage we do not consider that Qantas and Japan Airlines’ proposal passes that test.”

The competition watchdog notes that prior to the COVID-19 pandemic, Qantas and Japan Airlines were the only two airlines offering direct flights between Melbourne and Tokyo. They were also two of only three airlines offering direct flights between Sydney and Japan’s capital.

Mr Sims said: “The airline and tourism sectors have been severely impacted by the COVID-19 pandemic. Protecting competition in the airline industry is critical to ensuring recovery in the tourism sector, once international travel restrictions ease. This proposed coordination would appear to undermine competition significantly by reducing the prospect of a strong return to competition on the Melbourne – Tokyo and Sydney – Tokyo routes when international travel resumes.”

“Granting this authorisation would seem to eliminate any prospect of Qantas and Japan Airlines competing for passengers travelling between Australia and Japan, as they did before the COVID-19 pandemic. This elimination of competition would benefit the airlines at the expense of consumers,” he added.

The regulator also believes that Qantas and Japan Airlines combining their operations would make it more difficult for another airline to seek to launch flights on these routes.

What now?

The ACCC is now seeking submissions from interested parties in response to this draft determination by 27 May 2021. After which, it will make a final decision after consideration of those submissions.

Qantas has not yet responded to the news.

More reading

• Could the grounded Qantas (ASX:QAN) share price take off in May?
• This ASX airline you never heard of could see 40% earnings boost
• Are ASX travel shares about to go through a big recovery?
• Brokers favourite ASX share for the COVID-19 reopening trade
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Strike Energy Ltd (ASX: STX) shares are in focus today following the company’s latest announcement. This morning, Strike Energy advised that its Project Haber is forecast to reduce the carbon footprint of urea production by up to 60% in Australia.  At yesterday’s market close, the Strike Energy share price finished the day trading at 36 cents.

Strike Energy also estimates the project will boost the economy of Western Australia’s mid-west region by 3.8% per annum.

Let’s take a closer look at the oil and gas developer’s latest news.

Haber Project update

Strike Energy shared its Haber Project’s carbon and economic impact assessment with the market this morning.

It found the project could increase Australia’s gross domestic product by an average of $246 million each year and avoid the release of up to 795,000 tonnes of carbon annually.

The Haber Project aims to produce urea, a synthetic fertiliser high in nitrogen. It’s made with a combination of natural gas, nitrogen and water.

Strike Energy found the project will see a 50% to 60% reduction in carbon emissions from the production of urea used in Australia. According to the company, this would be achieved through its modern technology, high-quality feedstock and green hydrogen inputs.

According to Strike Energy, 95% of the urea currently used in Australia is imported from Saudi Arabia, Qatar, and China. In these countries, older ammonia and urea technologies are often used on poor-quality feedstocks like high-impurity gas or coal.

Strike Energy states the economic benefits of the project equate to an income boost of $10.3 billion. That’s the equivalent of $664 in extra income each year for every resident of Western Australia’s mid-west region.

Finally, the company said the project’s contribution to Western Australia’s payroll tax, port dues and GST will be the equivalent of the cost of a new high school each year.

Commentary from management

Strike Energy CEO and managing director Stuart Nicholls commented on the project’s estimated benefits, saying:

Project Haber is fast becoming a project of national significance as Strike continues to identify additional economic and environmental benefits.

Project Haber personifies the intensions of the ‘gas led recovery’ and shows how the development of low-cost gas in partnership with green hydrogen and other renewable energy can transition Australia to a sustainable and viable lower carbon future.

Reducing the carbon intensity of Australia’s agriculture will be complemented by a structural reduction in the costs of urea in Australia. This is a huge benefit for Australian farmers as they will be able to reduce their CO2 exposure in parallel to supporting the domestic economy.

Strike Energy share price snapshot

Investors will be hoping today’s news provides a boost to the Strike Energy share price, which is currently down 5% since the market opened on Monday.

Though Strike Energy shares are still well and truly in the green year to date, currently up 22% in 2021. The company’s shares are also up 153% over the last 12 months.

Strike Energy has a market capitalisation of around $701 million, with 1.9 billion shares outstanding.

More reading

• What’s causing the Strike Energy (ASX:STX) share price surge?
• Strike (ASX:STX) share price freefalls 9% on capital raising efforts
• Why Mineral Resources, Origin, Strike, Whitehaven shares are sinking
• Strike Energy (ASX:STX) goes into trading halt for $80m cap raise
• Strike Energy (ASX:STX) share price rising on more WA gas discoveries

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Regis Resources Limited (ASX: RRL) share price is one to watch today after the company provided an acquisition update.

At Wednesday’s market wrap, the gold miner’s shares closed the day at $2.67.

Why the Regis share price is on watch

Investors will be keeping an eye on the Regis Resources share price today after the company announced its board has approved the development of a new underground mine under the current Garden Well open pit.

According to this morning’s release, Regis has been granted approval for the transfer of certain tenements from IGO Ltd (ASX: IGO). This means that the proposed acquisition of a 30% interest in the Tropicana project by Regis has been given the green light.

The consent of the transfer came from the Minister of Mines and Petroleum.

Regis will now look to complete the transaction of sale with a cash consideration of $903 million. This is expected to occur on or around 31 May 2021.

Regis Resources managing director and CEO Jim Beyer commented:

We are very pleased that the Minister’s approval for the tenement transfer has been received and, now that the transaction is unconditional, we look forward to completing the deal.

…This acquisition provides significant strategic benefits to Regis and when combined with our existing assets, provides a larger-scale, longer-term financial and operating platform to pursue internal and external growth opportunities.

About Tropicana

Located in the Albany-Fraser Orogen in Western Australia, the Tropicana gold mine is considered one of Australia’s top five largest gold mines.

The open-pit and underground mine achieved gold production of 463 thousand ounces (koz) in FY20. Furthermore, the site has guidance of between 380koz to 430koz at an all-in-sustaining cost of $1,730 to $1,860 in FY21. The lower estimate is due to the impact at Havana for access to the deeper open pit ore from late-2021.

Regis share price performance

It’s been a rough 12 months for investors, with Regis Resources shares plummeting 40% since this time last year. Furthermore, the company’s shares hit a multi-year low just last week. When gazing over the company’s year-to-date performance, the Regis share price is down by around 28%.

At today’s prices, Regis has a market capitalisation of roughly $1.86 billion, with approximately 696.6 million shares on issue.

More reading

• Struggling ASX gold shares just got upgraded by a top broker
• Top brokers name 3 ASX shares to sell next week
• Why Coles, Nickel Mines, Nitro, & Regis Resources are storming higher
• Why ASX gold miner Regis Resources (ASX:RRL) share price is moving higher
• IGO (ASX:IGO) share price lifts on latest updates

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Just when you thought a rapid vaccine rollout would lead to good news for brick-and-mortar stores, Amazon (NASDAQ: AMZN) comes along and reminds investors just how large a shadow e-commerce can cast by crushing its first-quarter earnings.

I wrote in April that the king of e-commerce has a habit of exceeding expectations, and it came through on April 29 doing just that as it outperformed revenue growth guidance of 33% to 40% with a 44% year-over-year increase to its top line.

The first-quarter earnings report was strong across the board, but here’s one important number you might not have noticed.

Sales aren’t letting up …

The obvious story in Amazon’s earnings report was retail. U.S. sales accounted for 59% of total revenue in the first quarter as Amazon has stepped up its retail capabilities during the pandemic to provide customers with essentials (and everything else). This contributed to outsized growth over the past year. 

While U.S sales increased 40% year over year, international sales were up 60% and accounted for 28% of total revenue. Amazon made a lot of progress with its international expansion in the first quarter, including a new website in Poland and the first international use of its cashierless Just Walk Out technology in London. These are just a glimpse of its efforts abroad as Amazon continues to widen its global reach.

… and retail is contributing more to the bottom line

Amazon Web Services (AWS) had a great quarter as well, though it didn’t grow quite as quickly with revenue up 32% year over year. However, AWS has always punched above its weight in terms of profitability as the segment accounted for 59% of operating income last year despite making up just 12% of total sales.

But in the first quarter, the contribution from AWS to operating income shrank to just 47%, even as operating margin for the segment held steady at about 31%. What you probably missed from this latest quarter was the role the company’s retail operation played in the boost to profitability.

Across the U.S. and international retail operations, operating margin more than tripled year over year to 4.9%, helping to push Amazon’s total operating margin during the first quarter from 5.3% to 8.2%. That boost was partially driven by lower pandemic-related expenses, but profitability was still much higher than pre-pandemic levels.

The company’s net margin widened to 7.5% as well — net income of $8.1 billion more than tripled year over year.

A new era for Amazon

Amazon has been the leader in e-commerce for years, but the dramatic shift to digital shopping over the past year presents the company with huge opportunities. And with a new CEO coming on board later this year, there’s a lot for investors to track going forward.

The company has invested in many initiatives to solidify its dominant position, including fulfillment infrastructure to increase the speed and reach of its shipping services, eating into the bottom line. But it’s also working to lower these costs through its own last-mile delivery network, for example. As a retailer that has to account for cost of goods sold, margins will always be narrower than, say, a cloud computing company, but as e-commerce increasingly becomes the norm and shipping costs more competitive, Amazon is demonstrating that it can turn more of its top line into profits.

Amazon stock has increased over 40% in the past year. As the company continues to rack up sales, widen margins, and benefit from consumer shopping trends, investors can expect even more gains.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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• Here are the US shares that ASX investors were buying last week
• Why Amazon stock gained 12% in April
• Amazon just posted a record profit margin: 3 reasons it will get even better
• ASX 200 Weekly Wrap: Shares have average week but a great month
• Retail just changed. Forever…

Jennifer Saibil has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 1 number you might have missed from Amazon’s earnings appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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There are a number of reasons why Xero is such a high-quality ASX share worthy of being in most portfolios.

The cloud accounting software business started off in New Zealand but has now expanded significantly to become a global business.

The Xero share price has gone up by 74% over the last year. There are a few reasons why it could just keep climbing:

High margins

Xero has one of the highest gross profit margins on the ASX.

In the FY21 half-year result it reported that the gross profit margin increased from 85.2% to 85.7%. That shows how profitable it is for Xero to add new subscribers.

The power of software is that it can be replicated for clients at very little cost.

Almost all of the new revenue falls to the next profit line.

Xero invests a lot of money into growing the business, but COVID-19 saw the company remain disciplined with spending money. It showed how profitable it could become in the future. Whilst operating revenue grew by 21%, earnings before interest, tax, depreciation and amortisation (EBITDA) went up 86% to $120.8 million.

Long-term growth focused

Xero has been focused on growth for over a decade. It’s trying to invest as much as it can into initiatives that make sense to improve its offering for subscribers and growing market share.

This results in a lower EBITDA and net profit margin than it is capable of, but it grows the value of Xero for shareholders faster (in a more tax efficient way).

Indeed, Xero says:

Xero is a long-term orientated business with ambitions for high-growth. We continue to operate with disciplined cost management and targeted allocation of capital. This allows us to remain agile so we can continue to innovate, invest in new products and customer growth, and respond to opportunities and changes in our operating environment.

Xero has been making bolt-on acquisitions to fast-track an improved product. Tickstar and Planday are two of the latest examples.

Xero is a global leader

Xero is arguably the best cloud accounting company in the world.

It has created numerous time-saving and useful tools, including workflows that can be automated.

The cost of a Xero subscription to subscribers is relatively low, making it very attractive value for business owners and accountants who appreciate how quickly the software does what they want it to. Time is money, after all.

Xero reported in the FY21 half-year result that its total subscriber numbers increased by 19% to 2.45 million in the FY21 half-year result. That included 1 million subscribers in Australia (up 21%), 638,000 in the UK (up 19%), 414,000 in New Zealand (up 13%) and 251,000 in North America (up 17%). The other segment that Xero reports is ‘rest of the world’ which had 136,000 subscribers – an increase of 37%. The rest of the world includes dozens of countries, but notable locations include South Africa and Singapore.

It’s already one of the largest tech shares on the ASX, it could become one of the biggest overall companies in the years to come. 

More reading

• One MASSIVE thing about Tesla and Afterpay that people forget
• 2 quality SaaS ASX shares to buy in May 2021
• Why the Xero (ASX:XRO) share price charged higher in April
• 3 stellar ASX growth shares for investors in May
• The Xero (ASX:XRO) share price is smashing the ASX 50 this month

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

The post 3 reasons why Xero (ASX:XRO) is such a high-quality ASX share appeared first on The Motley Fool Australia.

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