The Commonwealth Bank of Australia (ASX: CBA) share price is joining the broader selloff on the S&P/ASX 200 Index (ASX: XJO) today.

In late afternoon trading, the Commonwealth Bank share price is down 1.2%, while the ASX 200 has slipped 1%.

That makes 3 days of losses for CBA shareholders this week, with shares posting gains only on Tuesday and Wednesday. Tallied together the Commonwealth Bank share price has slipped 0.8% this week.

Commonwealth Bank share price hit new 52-week high

Still, the past 12 months have been far from painful for CBA shareholders. Last Friday, 23 April, the Commonwealth Bank share price closed up 0.3% to trade for $89.39 per share, a 52-week high.

At the current $88.92 per share, CBA has a market cap of $157.9 billion, making it Australia’s largest bank.

Only 12 months ago you could have bought CBA stock for $62.69 per share. Meaning you’d be sitting on a 41.8% gain today. By comparison, the ASX 200 has gained 27% in that same time.

CBA has also edged out the ASX 200 so far in 2021. Year-to-date the Commonwealth Bank share price is up 6.2% while the ASX 200 has gained 5%.

What’s new with CBA this week?

Commonwealth Bank looks to have upped its game in the battle for market share with the growing crowd of buy now, pay later shares.

Last year CBA launched NEO, a zero-interest credit card allowing users to repay their purchases in instalments for a fixed monthly fee. Now the banks have expanded that offer to small businesses, for amounts up to $3,000.

As news.com.au reports, CBA’s head of small business banking Claire Roberts said “the card would assist businesses and start-ups gain access to quick and cheap funds for their operations”.

According to Roberts:

A dedicated business credit card with no interest, no late fees and no foreign currency fees ticks the boxes for small businesses who want more flexibility with short-term cash flow to make purchases for their operations. Further, the fixed monthly fee provides small business owners with some level of financial certainty, which will help with their budgeting.

More reading

• ASX copper shares are sliding…buy the dip?
• 2 quality ASX 200 tech shares to buy for May
• Nufarm (ASX:NUF) share price rises ahead of next month’s profit results
• How to find the best ASX shares on the share market
• Why supply and demand is the enemy of ASX resources shares

Motley Fool contributor Bernd Struben 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 Eagers Automotive Ltd (ASX: APE) share price is in the green today, while the most of the ASX is firmly in the red. This comes after the company provided an update on the sale of its Daimler operations.

The automotive company’s shares closed today’s trade at $15.66, up 1.62%. In comparison, the S&P/ASX 200 Index (ASX: XJO) is sitting at 7,025 points, down 0.8%.

What did Eagers announce?

Investors pushed the Eagers Automotive share price higher after digesting the latest news from the company.

In its announcement, Eagers Automotive advised it has completed the sale of its Daimler Truck Operations to Velocity Vehicle Group.

Based in the United States, Velocity Vehicle Group operates as an automotive retailer. The group provides aftermarket parts and services for trucks, diesel engines and transmissions. In addition, the company offers rental and leasing services to its customers across California, Hawaii and Arizona.

Eagers Automotive also noted that the sale of the Milperra property to Velocity Vehicle Group remains on track. It is expected that the transaction will be completed sometime within the first half of this year.

Eagers Automotive estimates it will receive roughly $108 million from both sales. Profit before tax is forecasted to come in between $32 million and $36 million. This excludes transaction costs and the impact of AASB16 leases, while subject to external audit and final adjustments.

Eagers Automotive share price summary

The Eagers Automotive share price has been charging higher over the past 12 months, up more than 200%. Surprisingly, the company has performed well despite COVID-19 affecting the automotive market and supply chain logistics.

It’s worth noting that the Eagers Automotive shares are within reach of their all-time high of $17.67 achieved earlier this month.

Based on today’s share price, Eagers Automotive has a market capitalisation of around $4 billion, with 256.9 million shares outstanding.

More reading

• Why retailers are stepping up as top performing ASX shares this week
• Brokers think these shares can outperform the ASX 200
• Why brokers think these 3 top performing ASX 200 shares can beat the market
• Why Eagers Auto, Orocobre, Sims, & Titomic shares are storming higher
• The Eagers (ASX:APE) share price is near all-time highs

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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The Cleanaway Waste Management Ltd (ASX: CWY) share price has today made a new 52-week high. Cleanaway shares opened at $2.77 this morning after closing at $2.78 yesterday. But following a short dip soon after open, Cleanway rocketed higher and hit the new benchmark of $2.84 a share. The shares are still trading roughly at that level at the time of writing at $2.83, up 2.17% for the day.

Cleanaway Waste has had an extremely good month, and year, which has culminated in today’s news. The company was going for just $1.87 a share 12 months ago, and $2.20 at the start of the month. That puts the Cleanaway share price gains at 51% and 28.6% respectively. Over the past 5 years, the performance has been even more rewarding for shareholders. Since May 2016, Cleanaway shares are up more than 258%, not including dividend returns.

So what’s been going so right for Cleanaway of late?

Cleanaway share price cleans up 

It was only back in January that Cleanaway was facing some leadership disruption. Its long-time CEO and managing director, Vik Bansal, resigned after facing some workplace misconduct allegations last year. Mr Bansal’s permanent replacement has not yet been named, but CEO duties have been assumed in the meantime by the company’s chair Mark Chellew. 

But that has all been forgotten in light of more recent developments. Earlier this month, Cleanaway announced that it was acquiring the Australian recycling and recovery business of the French waste management company Suez. 

Just this week, we got an update on this deal, which has now been terminated and will not go ahead. However, a part of the deal will still proceed – the acquisition of Suez’s portfolio of Sydney-based post‐collection assets. The deal will result in Cleanaway paying $501 million. Investors didn’t really like all of this uncertainty at the time. But now all seems to be forgiven, judging by the new highs today.

It also seems fitting to mention that Cleanaway’s rival Bingo Industries Ltd (ASX: BIN) has been enjoying some share price success as well. This is a result of the company receiving an acquisition offer of its own from Macquarie Infrastructure and Real Assets of $3.45 per share. 

On the current Cleanway share price, the company has a market capitalisation of $5.83 billion. At this level, Cleanway has a price-to-earnings (P/E) ratio of 40.22, and a trailing dividend yield of 1.54%. 

More reading

• Downer (ASX:DOW) share price may only be at start of a capital return cycle
• Cleanaway (ASX:CWY) share price falls on acquisition update
• 2 ASX shares ready for a post-COVID rally: fundie
• ASX 200 flat: Zip rockets, Cleanaway higher, Regis-IGO announce Tropicana deal
• Cleanaway (ASX:CWY) share price on watch after Suez acquisition collapses

Motley Fool contributor Sebastian Bowen 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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In hindsight, it’s not much surprise that the Aristocrat Leisure Limited (ASX: ALL) share price is among the strongest performing ASX 50 shares in April.

Aristocrat shares are up 6.88% to $37.14 this month, and both Goldman Sachs and Citi think they are due to go higher.

The leading pokie and casino management business fell to less than half its current price through COVID-19 last year, but the business’ forecasts are now showing that was exceptionally pessimistic.

Aristocrat’s projected future growth

Goldman has set Aristocrat a price target 27 cents above its current value, while Citi has set its target at $40.60. The company’s annual general meeting in February revealed that 90% of its pokie machines are active across Australia and the US, while its digital arm continues to gain market share from its rivals.

In addition to its gaming operations, Aristocrat subsidiary Big Fish is the world’s largest distributor of free-to-play online games, which positions Aristocrat to continue growing its digital gambling revenue.

It’s possible Aristocrat share price gains are being driven by this digital potential, with the company aiming to spend up to 28% of its online revenue on new customer acquisition.

The company is already in the top-five mobile gaming operators in the world. Leading into April, Aristocrat was bullish about its own plans to continue growth in gaming operations.

So was broker Morgan Stanley, which said the company’s balance sheet makes it the best bet in the gaming industry.

This leaves ALL best placed to continue to outperform peers and gain market share in participation gaming, and strengthen its competitive position and the durability (and hence value) of its earnings, in our view.

We think ALL’s Digital business deserves a 18x FY22 EV/EBIT multiple, at the top end of mobile gaming peers. Post COVID-19 we expect ALL to emerge in a net cash position in FY23 with ~A$1.9bn of debt capacity to deploy by FY22.

Aristocrat share price snapshot

Considering the Aristocrat share price has risen 20% in 2021 and by 45% in the past 12 months, it’s still had its volatile moments.

This is the third time Aristocrat shares have been above $34 since November, but it’s the first time they’ve managed to stay there for more than two weeks. 

More reading

• 4 ASX shares to boom when inflation goes up: fundie
• The ASX 200 shares brokers think you should watch out for
• Big brokers think these 5 ASX shares can outperform the market
• Why this broker thinks the Aristocrat Leisure (ASX:ALL) share price can go higher
• Brokers name 3 ASX shares to buy now

Motley Fool contributor Lucas Radbourne-Pugh 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 Aristocrat (ASX:ALL) share price up 7% this month, tipped to go higher appeared first on The Motley Fool Australia.

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ASX copper shares are broadly sliding today.

Now most ASX copper miners and explorers are also involved with other metals, like gold and nickel, to name a few. When you’re digging into the dirt, after all, you’ll separate out anything with value.

But it’s shares with a sharper focus on copper we’ll stick with today. Shares like OZ Minerals Limited (ASX: OZL), Sandfire Resources Ltd (ASX: SFR), and Aeris Resources Ltd (ASX: AIS).

These ASX copper shares are sliding today

Aeris Resources’ share price is down 2.8% in afternoon trading, giving the company a market cap of $195 million. Aeris has struggled this year, with shares down 7.3% in 2021.

Over the past 12 months, however, it’s a different story, with Aeris’ share price soaring 155% since 30 April last year.

Sandfire Resources’ shares are also slipping today, down 4.2% at the time of writing. This comes after the ASX copper share hit an almost 2-year high on Wednesday, following the release of its quarterly activities report. That report indicated that costs were in line with estimates while production was forecast to come in at the upper end of guidance.

With a market cap of $1.2 billion, Sandfire Resources is part of the S&P/ASX 200 Index (ASX: XJO). The ASX copper share pays a 3.3% dividend yield, fully franked. And while the share price has slipped today, shares remain up 47% over the past 12 months and up 23% year-to-date.

OZ Minerals counts as the largest ASX copper share of the 3, with a market cap of $8 billion. OZ Minerals’ shares were down 2.7% earlier today and are currently down 1.4% since the opening bell. OZ Minerals pays a 1% dividend yield, fully franked.

Like the other ASX copper shares above, OZ Minerals’ share price also remains a strong performer despite today’s retrace. OZ Minerals’ shares are up 168% over the past 12 months and up 24% so far in 2021.

All 3 ASX copper shares have handily beaten the returns from the ASX 200 over the past full year and year-to-date. The ASX 200 is up 27% in the last 12 months and has gained 5% in 2021.

Copper eyeing all-time record highs

Many factors determine how well a resource miner performs and what kinds of returns they can deliver to shareholders. But the price of the commodity they dig from the Earth remains a critical aspect to their success.

Looking at the returns of the ASX copper shares above, then, it will come as little surprise that the price of copper has almost doubled in the past year.

That’s right, on 1 May 2020 a tonne of copper was selling for US$5,110. At the time of writing, that same tonne is worth US$9,885. That’s down, incidentally, from US$10,000 per tonne just a few hours ago. And it remains within a whisker of the red metal’s all-time high of US$10,190, set in February 2011.

Like many other metals, including iron ore, copper is benefiting from record low-interest rates across most of the world, while developed nations open up the spending taps for infrastructure projects to boost their pandemic addled economies. Copper is also a core component in the wiring and batteries needed for most electric vehicles along with power grid battery storage.

What can investors expect next from copper prices?

A growing list of analysts is forecasting a strong mid to longer-term outlook for copper prices. Which in turn should continue to offer welcome tailwinds for ASX copper shares.

As Bloomberg reports:

With copper demand set to soar once more, there are mounting concerns that producers will struggle to plug the gap as they battle a host of technical and regulatory pressures. In the longer term, producers worry that plans to boost mining royalties could stifle investment.

Robert Edwards, Principal Analyst, base metals at CRU Group is decidedly bullish on the outlook for copper. Edwards says, “The copper price has gone stratospheric and probably has further to go, which is a boon for miners who are currently making at least two dollars for every one they spend getting metal out of the ground.”

Wenyu Yao, senior commodities strategist at ING Bank also has an optimistic outlook for the red metal. According to Yao:

The copper rally still has legs to go. The outlook for the US economy keeps getting better. Economic reopening coupled with massive stimulus, faster-than-expected vaccine rollouts and supportive fundamentals all point to even higher prices.

Speaking of a rally with legs to go, Tom Palmer, the CEO of gold mining behemoth Newmont Corporation (NYSE: NEM) told Bloomberg TV, “I think copper’s got a pretty good story in front of it. I think its day in the sun is more toward the end of this decade.”

We’ll leave off with Goldman Sachs, whose analysts forecast the red metal will trade at US$11,000 per tonne inside of 12 months. Goldman sees 2 or more years of price gains ahead for copper from there. The broker forecasts a price of US$11,875 in 2022 and US$12,000 in 2023.

If the bullish case for copper pans out as these analysts expect, ASX copper shares should be among those to benefit.

More reading

• 2 quality ASX 200 tech shares to buy for May
• Nufarm (ASX:NUF) share price rises ahead of next month’s profit results
• How to find the best ASX shares on the share market
• Why supply and demand is the enemy of ASX resources shares
• ASX 200 down 0.6%: ResMed lower on Q3 update, Beach Energy crashes 23%

Motley Fool contributor Bernd Struben 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 Telstra Corporation Ltd (ASX: TLS) share price has had a roller coaster of a month in April. Much like a roller coaster, it had its ups and its downs, but it pretty much ended up in the same place it started.

Between the close of trade on 31 March and the time of writing just moments before Friday’s close, the telecom’s share price dropped only 0.88% or 3 cents. However, over the month, it reached an 8-month high, dipped and then finally plateaued compared to the beginning of the month. At the same time, the S&P/ASX 200 Index (ASX: XJO) increased by around 3.4%.

Here are a few of the major stories that impacted the Telstra share price over the last month.

The big stories driving the Telstra share price

Restructuring tailwinds

As mentioned, Telstra shares rose to an 8-month high in early April. As Motley Fool reported at the time, the most likely reason for this was continued momentum from Telstra’s proposed restructuring.

The company said it plans to reorganise its operations into four entities under the umbrella group. InfraCo Fixed will own and operate Telstra ducts, fibre, data centres, and exchanges. InfraCo Towers will own and operate its mobile tower assets and ServeCo will own the radio access network and spectrum assets.

The final asset will be its international arm, which will also own its undersea cables. The company will then look to offload its tower business, which was arguably the main impetus for Telstra share price rise.

Overseas ambitions

On 16 April, it was reported the telco had been in talks with a private equity firm to further expand overseas.

At the time, it was reported that Telstra had held “advanced talks” with I Squared Capital and PCCW Global of Hong Kong to merge its international division with the subsidiary of Hong Kong Telecom. Telstra and I Squared planned to launch a bid for PCCW together and then run the company as a joint venture. It was not clear at the time if the talks were ongoing. This is still the case. After this story broke, the Telstra share price dipped.

Speeding away with 5G

Telstra describes itself as having “Australia’s largest 5G network”. But its mobile data coverage came into focus this month, with some speculating as to whether the Telstra share price could run any higher.

Telstra CEO, Andrew Penn, said the company’s $277 million investment in boosting its capacity in capital cities was an important future investment.

mmWave spectrum [for 5G] is especially good at providing high-speed mobile broadband in high-density areas, such as built-up cities and towns, train stations, sports stadiums and other locations with a high concentration of people using their mobile devices.

Telstra share price snapshot

While the Telstra share price has had a relatively flat April, it has increased by around 13% over the last 12 months. Since the beginning of this calendar year, it’s also appreciated by around 12%.

Just this week, Telstra shares were highlighted by a fund manager as a relatively safe investment in case of future inflation and higher interest rates.

The company has a current market capitalisation of around $40.3 billion.

More reading

• 7 ASX 200 shares with emission reduction strategies
• 4 ASX shares to boom when inflation goes up: fundie
• Here’s an ASX telco share tipped to rise 40%
• These ASX dividend shares have attractive fully franked yields
• 2 fantastic ASX 200 dividend shares rated as buys

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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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Over the next couple of weeks, the big four banks will be handing in their latest report cards. Ahead of their releases, I thought I would take a look to see what the market is expecting from them.

On this occasion, I’m going to look at the National Australia Bank Ltd (ASX: NAB) half year result.

What is expected from NAB in the first half?

NAB is scheduled to release its half year results on Thursday 6 May.

According to a note out of Goldman Sachs, it is the broker’s top pick among the big four banks. Goldman currently has a conviction buy rating and $29.63 price target on its shares. As you might expect, this means it has high expectations for this result and the second half.

The note reveals that Goldman expects the banking giant to report cash earnings of $3,031 million. This will be up 77% on the prior corresponding period.

On the bottom line, the broker is forecasting earnings per share growth of 43% to 85.4 cents.

This is expected to lead to the NAB board declaring a 55 cents per share fully franked interim dividend.

What else should you look out for?

One thing the broker is looking out for is a potential reversal on its bad and doubtful debts (BDDs). It notes that two of its rivals have already made positive adjustments, but NAB has yet to do so.

It commented: “NAB, unlike peers ANZ and WBC which both reported bad debt benefits, saw a 1Q21 bad debt charge of A$15 mn […] We currently forecast a 1H21E BDDs/TL to 11bp from 56bp in the previous half and will be interested in hearing management commentary around whether there is scope for recoveries.”

Another thing to watch is its expenses. Goldman is forecasting a reduction in expenses during the half.

It explained: “NAB’s 1Q21 expenses fell 1% on the 2H20 quarterly average, reflecting benefits from productivity and lower restructuring costs, partly offset by provisions for performance-based compensation […] We are forecasting 1H21E expense growth of -0.9% hoh and will be interested to get an update on NAB’s cost management initiatives has played out since the FY20 results.”

Finally, a third thing to look out for is the bank’s margins. While Goldman is expecting a decline in its net interest margin, it is optimistic that a recovery is coming.

Goldman said: “At the 1Q21 trading update NAB spoke to reported net interest margins having declined, but stable on an ex-Markets and Treasury and liquids basis. The underlying flat NIM was driven by competition and the impact of lower rates, offset by home loan repricing and lower funding and deposit costs. Our detailed analysis quantifies the scope for sector NIM upside in the near term. Accordingly, we forecast 1H21E NIM of 1.75% which is down 2bp vs 2H20 and will be keen to get an update on NAB’s NIM performance.”

More reading

• Why ASX bank shares may be facing a big sell-off in the next few weeks
• ASX bank shares best placed to ride the $1bn+ provisioning profit boost this reporting season
• What could APRA’s climate guidance mean for ASX bank shares?
• Is the Commonwealth Bank (ASX:CBA) share price a buy at $90?
• Is the CBA (ASX:CBA) share price a buy for a recovery of dividends?

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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The Afterpay Ltd (ASX: APT) share price has fallen on six of the previous nine days — by as much as 6% per day — and is still this month’s best performer on the ASX 50 by a large margin.

Afterpay shares are down 2.54% today and 5.37% this week to $117.65 per share. Yet the buy now, pay later giant has still gained 11% this month, beating ASX 50 runner-up Xero by 3% and the broader index by 9%.

Let’s take a closer look at the Afterpay share price’s highs and lows in April.

Afterpay, Afterpay, Afterpay

It’s doubtless the most talked-about ASX share of this year and potentially many others, and for a company that’s not even four years old, it’s no surprise that there appears to be new milestones (good and bad) virtually every week.

The biggest Afterpay investor news this month was the company’s quarterly update that showed triple-digit payment volume growth, as well as a 75% growth rate in active customers and strong gains in the U.S. and U.K. markets.

Afterpay also has the Midas touch at the moment. It signed an agreement with New Zealand financial services firm Novatti Group Ltd (ASX:NOV) yesterday and instantly sent the Kiwi’s share price skyrocketing 26% higher.

These sort of continued growth figures are why the Afterpay share price rose from $12 per share in March 2020 to $151 per share by February this year. But there are continued pressures, and broker evaluations are often even more wild than the actual share price fluctuations. 

US broker Bernstein has set a price target of just $40, a more than 60% decline, on Afterpay due to expected profit-margin concessions as the company competes with other buy now, pay later companies. It says PayPal Holdings Inc (NASDAQ: PYPL) experienced the same struggles when it began offering similar services.

On the other hand, Citi set its Afterpay price target at $128 and Jefferies sets it even higher than the current price, back above $150.

Afterpay share price snapshot

Overall, the Afterpay share price has now risen 276% over the past 12 months. The real question for investors now is what will happen if (or when) it takes the plunge on the US markets.

More reading

• How to find the best ASX shares on the share market
• 2 outstanding ASX growth shares that could be great buy and hold options
• Novatti (ASX:NOV) share price rockets 27% on Afterpay deal
• The Sezzle (ASX:SZL) share price is rising on new partnership
• Openpay (ASX:OPY) share price slides despite positive quarterly update

Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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 Charter Hall Group (ASX: CHC) share price remains flat today despite the company announcing an upgraded earnings guidance.

During late-afternoon trade, the property company’s shares are unchanged from yesterday’s closing price of $14.13.

What did Charter Hall announce?

Investors are indecisive by the company’s market update, leaving Charter Hall shares unmoved for the day.

According to its release, Charter Hall advised that it expects post-tax operating earnings security to increase more than 57 cents. This represents a 6% growth on distribution per security when compared against FY20.

The group noted that the upgraded guidance is provided that there is no material change in current trading conditions. Furthermore, the projected result assumes its operating environment is not heavily affected by COVID-19.

Charter Hall noted that the guidance does not take into account any accrual for performance fees that may be realised.

Previously, the group’s FY21 guidance estimated post-tax operating earnings security to come at 55 cents per security.

Charter Hall managing director and group CEO, David Harrison touched on the company’s progress, saying:

Our Direct business has continued to enjoy strong inflows reflecting the quality of these portfolios and the attractive returns they offer. This has resulted in capital deployment that exceeded our previous expectations.

Mr Harrison also commented on Charter Hall’s outlook, adding:

As we look towards FY22, we have significant investment capacity across the platform, a strong pipeline of deployment opportunities both off-market and from our development book, as well as uncrystallised performance fees embedded in many of our funds.

About the Charter Hall share price

Over the past 12 months, the Charter Hall share price has gained above 80%, however, year-to-date performance is 4% down. The group’s shares reached an all-time high of $15.29 in late December 2020 and could break that feat again.

On valuation grounds, Charter Hall presides a market capitalisation of around $6.5 billion, with 465.7 million shares outstanding.

More reading

• Charter Hall (ASX:CHC) share price slips despite positive update
• This beaten-down ASX sector could soon be turning the corner

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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There are a handful of quality S&P/ASX 200 Index (ASX: XJO) tech shares that could be worth looking at.

Businesses with good margins, large addressable markets and long-term growth plans may have the potential to make good returns:

Altium Limited (ASX: ALU)

The Altium share price is down 24% since 9 November 2020 with COVID-19 impacts continuing to hurt the electronics PCB software business.

However, a lower share price gives investors the opportunity to buy at a cheaper level for the long-term.

Despite the shorter-term issues relating to pricing and China, the ASX 200 tech share has plans to reach market domination in the coming years.

A key part of those plans is Altium 365, its cloud offering. There is strong adoption of Altium 365 as it continues to add clients. At the time of the release of the half-year result a couple of months, it had 9,300 active monthly users and 4,400 monthly active accounts.

The Altium CEO Aram Mirkazemi said:

Altium 365 is key to our future success through indirect monetisation from our CAD software tools and, in time, direct monetsation from the broader ecosystem. I am most heartened by the strong adoption of Altium 365, and with our Netflix organisational changes behind us, I am confident of a much stronger second half. Early signs are positive for this.

Over the longer-term, Altium is expecting to generate a higher earnings before interest, depreciation and amortisation (EBITDA) margin in the coming years which will help grow the bottom line. 

At the current Altium share price, it’s trading at 48x FY23’s estimated earnings.  

Technology One Ltd (ASX: TNE)

Technology One is currently rated as a buy by Morgans with a price target of $9.99.

The ASX 200 tech share is currently shifting to a software as a service (SaaS) model which should lead to higher-quality revenue as well as good margins. In FY20 its churn was below 1%.

Technology One says that its global SaaS enterprise resource planning (ERP) solution is delivering a compelling value proposition for customers, providing them any device, any time access from anywhere around the globe as well as a cost-effective way to run their enterprise.

It continues to win new, large enterprise customers from competitors. It has added 104 enterprise customers to its global SaaS ERP solution. Technology One now has 539 large scale enterprise customers, with hundreds of thousands of users. It’s the largest provider in Australia.

FY20 saw its total annual recurring revenue (ARR) hit $222 million and is set to exceed $500 million in the coming years. The ARR stands at 86% of total revenue which means the majority of revenue is locked-in at the start of the financial year which positions it well to achieve growth in FY21.

Despite all the impacts of COVID-19, Technology One achieved growth in the 12 months to 30 September 2020. Underlying profit before tax went up 13% to $86.1 million and SaaS ARR rose 32% to $134.6 million. Cashflow generation from the ASX 200 tech share increased 49% to $66.4 million.

According to Commsec, the Technology One share price is valued at 32x FY23’s estimated earnings.

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Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. 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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