Plenty of ASX tech shares are delivering high levels of growth. Some of them could be worth looking into for February 2021.

Here are some of those businesses that may be worth watching:

Redbubble Ltd (ASX: RBL)

Redbubble is an ASX tech share that’s focused on building its position as one of the world’s leading places for selling artist-produced goods. Independent artists sell everyday products like apparel, stationery, housewares, bags, wall art and so on.

Redbubble is focused on four key initiatives. The first is artist acquisition, activation and retention. Second, Redbubble is focused on user acquisition and transaction optimisation. The third focus is customer understanding, loyalty and brand building. Finally, further physical product and fulfilment network expansion is the last focus.

In the first quarter of FY21, Redbubble’s earnings benefited from a positive adjustment relating to delivery times. Excluding that positive adjustment, in the first quarter Redbubble saw marketplace revenue (paid) of $139.3 million, up 98%. Gross profit (paid) was $59.6 million, up 118%. Finally, earnings before interest and tax (EBIT) generated by Redbubble was $17.2 million.

Joseph Kim from Montgomery Investment Management said about the ASX tech share: “While Redbubble has clearly been a “stay-at-home” trade, we believe the business has the opportunity to emerge a longer-term structural winner from COVID-19 should it capitalise in the recent spike in user and customer interest as a result of recent lockdown measures.”

Kogan.com Ltd (ASX: KGN)

Kogan.com is another ASX tech share that continues to benefit from high levels of online shopping by consumers.

On Friday, the company delivered a business update for the first half of FY21.

Including the Mighty Ape acquisition, Kogan.com saw gross sales rise 96%, gross profit went up 120%, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) grew by more than 175% and EBITDA went up by more than 140%.

Kogan.com finished the 2020 calendar year with just over 3 million customers. Mighty Ape had another 719,000 customers itself.

Technology businesses can benefit from economies of scale and achieve higher profit margins. In FY17, Kogan.com’s EBITDA margin was 4.3%, it rose to 6.3% in FY18, climbed to 6.9% in FY19 and grew to 9.3% in FY20.

The company is proud of its growing membership base as well. Mr Kogan, the founder of the company, spoke about the benefit to the company of its growing number of people using its loyalty scheme at the FY20 result: “The Kogan First community of members grew exceptionally during the second half, and importantly these loyal members on average purchase and save much more often than non-members, demonstrating loyalty to the platform, and also demonstrating the significant savings and other benefits available through the loyalty program.”

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an ASX tech share that essentially services the US faith sector, particularly large and medium US churches.

It provides a donor management system, including donor tools, finance tools and a custom community app, as well a church management system.

Pushpay also owns Church Community Builder, which provides a software as a service (SaaS) church management system predominately in the US and other jurisdictions. It provides a platform that churches use to connect and communicate with their community members, record member service history, track online giving and perform a range of administrative functions.

One of the useful features of Pushpay’s technology is that it offers a livestreaming service so that the congregation can continue to stay connected with the church, despite everything that’s going on with COVID-19 and the related restrictions.

Pushpay continues to boast of growing operating leverage – its expense growth remains low but operating income is rising much faster. In the FY21 half-year result Pushpay announced that its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin had improved from 17% to 31%.

Pushpay recently upgraded its EBTIDAF guidance, it’s now expecting EBITDAF to be in a range of US$56 million to US$60 million.

More reading

• 2 ASX shares that are growing rapidly
• 5 of the best ASX shares to buy in February
• 3 ASX growth shares to buy in February 2021
• 3 reasons why the Kogan.com (ASX:KGN) share price could be an opportunity
• These were the worst performing ASX 200 shares last week

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd and PUSHPAY FPO NZX. 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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Last week was one that investors will be in a hurry to forget. The S&P/ASX 200 Index (ASX: XJO) fell a disappointing 2.8% over the week to end it at 6,607.4 points.

Another busy week lies ahead, with plenty to keep investors on their toes. Here are five things to watch:

ASX futures pointing lower

The Australian share market looks set to start the week in the red after another poor night of trade on Wall Street on Friday. According to the latest SPI futures, the ASX 200 is expected to fall 34 points at the open. In the United States, the Dow Jones fell 2%, the S%P 500 dropped 1.9%, and the Nasdaq tumbled 2% lower. All three major indices dropped over 3% for the week. This was their worst weekly performance since October.

Reserve Bank meeting

On Tuesday the Reserve Bank of Australia will be holding its first meeting of the year and will discuss the cash rate. According to the latest cash rate futures, the market is pricing in a 75% probability of a cut to zero. This would be more bad news for income investors, who will potentially have to contend with even lower rate interest rates on savings accounts and term deposits.

Credit Corp kicks off earnings season

Earnings season kicks off next week with the release of the Credit Corp Group Limited (ASX: CCP) half year result. According to Morgans, the debt collection company is expected to deliver a strong result. Its analysts expect cash collections to be up 10% on the prior corresponding period and half year net profit to be up 2.5%. Though, the broker does see upside risk to its profit estimates.

Crown report

The Crown Resorts Ltd (ASX: CWN) share price could be on the move next week. After the market close on Friday, the casino and resorts operator announced that the New South Wales Independent Liquor and Gaming Authority (ILGA) has advised that on Monday it will receive the final report of the Bergin Inquiry into the suitability of Crown Resorts to hold the licence for Sydney’s Barangaroo casino. The ILGA board will then consider the report and make its decision.

REA Group half year update

The REA Group Limited (ASX: REA) share price will be on watch on Friday when it releases its half year results. According to a note out of Morgans, its analysts expect a largely flat result. The broker is forecasting a slight revenue decline due to the impact of the Melbourne shutdown impact, which will be offset by increased cost control.

More reading

• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• ASX 200 ends 0.6% down, Kogan falls 8.5%, Service Stream soars 10%
• Brace for an IPO resurgence as new floats beat the ASX 200 by ~50%
• The latest ASX stocks to be hit by broker downgrades

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Crown Resorts Limited and REA Group 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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There are some compelling reasons why you might want to think about Sezzle Inc (ASX: SZL) at this share price.

What’s Sezzle?

Sezzle describes itself as a rapidly growing fintech company on a mission to financially empower the next generation. It offers interest-free instalment plans at online stores and certain in-store locations.

The company claims that the increase in purchasing power for consumers leads to increased sales and basket sizes for the merchants that offer Sezzle.

It’s one of several buy now, pay later (BNPL) players on the ASX including Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P) and Splitit Ltd (ASX: SPT).

3 reasons to consider Sezzle at this share price

1: It has been declining

It’s better for investors to pay a lower price than a higher price for the same business.

Since 25 January 2021, the Sezzle share price has fallen by 9.5%. That’s a sizeable drop over such a short period of time.

Sezzle shares have also fallen by 29% since 28 August 2021, though that price peak was only for a short period of time.

As legendary investor Warren Buffett once said about share declines: “When hamburgers go down in price, we sing the Hallelujah Chorus in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will buy except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.”

2: Delivering growth

Sezzle is one of the ASX shares that is delivering enormous revenue growth every quarter despite COVID-19 impacts.

It recently revealed its growth for the fourth quarter of 2020.

With underlying merchant sales (UMS), it said there was growth of 40.6% quarter on quarter and 205.4% year on year to US$320.8 million.

The average monthly UMS reached US$106.9 million, which was also an increase of 40.6% quarter on quarter and up 205.4% year on year.

Looking at Sezzle’s own income, merchant fees grew by 32.6% quarter on quarter and 195.6% year on year to US$17.2 million. However, the merchant fees as a percentage of UMS declined by 18 basis points year on year to 5.4%. The BNPL company says that is because it’s working with bigger merchants on slightly lower margins. 

The number of active consumers and active merchants increased significantly. The number of active consumers rose by 143.9% year on year to 2.23 million. Active merchants grew even quicker, rising by 166.6% to 26,690.

Sezzle reported that its active consumer repeat usage improved to 89.8%, which was up 75 basis points quarter on quarter and up 608 basis points year on year.

Sezzle executive Chair and CEO Charlie Youakim said: “Our efforts toward large enterprise merchants is paying dividends, as evidenced by our recent addition of GameStop and a number of mid-sized merchants such as UNTUCKit, Thursday Boots, Galls, Guidefitter and Pure Hockey.”

3: Exposure to the large addressable market of the US

Sezzle is focused on the US market, which has a much bigger population and addressable market than Australia. It has a sizeable market opportunity there.

Its instalment option went live in November with e-commerce platform Wix. The company’s integration is available to all Wix users in the US, Canada, India and in future regions as Sezzle expands.

However, the US is also where there is a lot of competition in the space from players like Afterpay. So the expansion into Canada and India maybe benefit the company over the long-term.

More reading

• Here’s why the Sezzle (ASX:SZL) share price is dropping lower
• ASX 200 drops 2%, IOOF and Afterpay shares sink, Bubs jumps
• Splitit (ASX:SPT) share price slides despite record quarter
• Zip and Vulcan were among the most traded ASX shares last week
• 2 ASX growth shares to buy in February

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 ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. 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 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.

More reading

• 5 of the best ASX shares to buy in February
• 3 ASX growth shares to buy in February 2021
• Why the Temple & Webster (ASX:TPW) share price hit new highs last year
• 2 compelling ASX payment shares to buy
• Why Beach, Fortescue, Iluka, & Temple & Webster shares are dropping lower

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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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.

More reading

• Why the IGO (ASX:IGO) share price is tanking today
• Investment specialist: ASX to buckle in for the commodity bull market of a lifetime
• ASX 200 down 0.7%: BHP & Fortescue tumble, Reliance rockets, CSL downgraded
• ASX 200 rises 0.4%
• ASX 200 Weekly Wrap: Change in America spurs ASX 200 higher

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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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.

More reading

• These top ETFs could be great options for ASX investors right now
• 2 excellent ETFs for ASX investors in February
• 3 explosive ASX growth shares that could be strong buys
• 2 high quality ETFs for ASX investors to buy today
• 2 tech ETFs delivering rapid growth

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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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.

More reading

• 3 ASX growth shares to buy in February 2021
• 2 ASX growth shares to buy
• 2 exciting mid cap ASX shares to buy and hold
• 2 compelling ASX payment shares to buy
• ASX 200 down 0.7%: BHP & Fortescue tumble, Reliance rockets, CSL downgraded

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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There are some ASX shares that a number of brokers like and have rated as ‘buys’

It can be quite hard to find good businesses that are trading at a good price. One investor might say that BHP Group Ltd (ASX: BHP) is a good buy, whilst another might say that Woolworths Group Ltd (ASX: WOW) is the share to buy.

Brokers are constantly looking at businesses and share prices, thinking about what would be a good investment. There are various brokers out there like Bell Potter, Macquarie Group Ltd (ASX: MQG) and UBS that provide different recommendations about shares.  

With that in mind, these ASX shares are liked by more than one broker. Of course, this still isn’t a guarantee of success – they could all be herding together.

City Chic Collective Ltd (ASX: CCX)

City Chic is an ASX share that’s currently liked by at least three brokers.

The company sells a range of apparel, footwear and accessories for plus-size women. City Chic is aiming to grow into a global business by growing organically and also making acquisitions of under-pressure businesses internationally. It can turn those acquisitions into higher-margin, online-only retailers. 

For example, it is just acquired Evans in the UK for $41 million. Evans is a UK-based retailer of women’s plus-size clothing with a loyal customer base and strong market position.

City Chic said that for the 12 months to August 2020, the Evans website made £23 million of sales from 19 million visits. The wholesale business also made £3 million of sales. The overall group, including the stores and franchise, made £60 million of annual sales before COVID-19 hit the UK retail sector.

According to Commsec, the City Chic share price is valued at 23x FY23’s estimated earnings.

Bapcor Ltd (ASX: BAP)

Bapcor is an ASX share that’s currently liked by at six brokers.

It describes itself as the leading auto parts business in Australasia. It’s one of the ASX shares that’s benefiting from a large increase in consumer spending.

In a trading update it said for the five months to the end of November 2020, group revenue was up around 26%. Management explained that Bapcor was achieving operating leverage from lower expenses in areas such as travel and other areas of discretionary expenditure.

In the FY21 first half, Bapcor provided guidance that its revenue is expected to grow by at least 25% and net profit after tax is expected to go up by at least 50%.

One of the ways that the ASX share plans to increase profit margins in the future is by finishing its new Victorian distribution centre, which is progressing well. This is expected to deliver “significant operational benefits”.

Reject Shop Ltd (ASX: TRS)

Reject Shop is currently liked by at least three brokers.

The discount retail ASX share is a business that is currently going through a turnaround phase by working on lowering the company’s costs.

The company said that it’s considering closing down some shops where the rental costs are more than the benchmark. Reject Shop will likely close those stores if the landlord isn’t willing to lower the rental costs.

Another way that Reject Shop has been trying to lower costs is by decreasing the number of SKUs (stock keeping units) that it sells. In other words, it’s trying to reduce the number of different products that it sells. By doing this, it’s increasing its sales per SKU, increasing the company’s buying power and ensuring better product availability for customers.

After the ASX share has ensured that its cost base is at a sustainable level, it will pursue store network expansion as well as pursuing an e-commerce offering, which it’s currently trialling.

In FY20, Reject Shop made a net profit after tax of $2.7 million, up from a loss of $16.9 million in FY19.

More reading

• Why the City Chic (ASX:CCX) share price is trading near record highs
• These ASX clothing retailers’ share prices are storming to record highs
• 2 ASX shares rated as strong buys by brokers
• 3 ASX shares rated as strong buys by brokers
• 4 ASX shares picked for returns in 2021 by brokers and fundies

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor and Macquarie Group 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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While earnings season hasn’t officially started, a number of companies have just released their quarterly updates.

Here’s a summary of three standout updates from last week:

Bigtincan Holdings Ltd (ASX: BTH)

This artificial intelligence-powered sales enablement automation platform provider delivered a strong second quarter update last week. That update revealed that Bigtincan’s strong form continued during the quarter, with annualised recurring revenue (ARR) increasing to $48.4 million. This represents growth of 50% on the prior corresponding period. It was driven predominantly by organic growth. Organic ARR came in at $40 million (up 42.9%) and ARR from acquisitions came in at $8.4 million.

Nitro Software Ltd (ASX: NTO)

Another impressive performer during the last quarter was this document productivity software company. Last week it released its fourth quarter update and revealed that its ARR reached US$27.7 million at the end of December. This was up 64% on the prior corresponding period and ahead of its previously upgraded guidance of US$26 million to US$27 million. Another positive was the increasing amount of revenue which is now from subscriptions. At the end of the period, subscription revenue had increased to approximately 58% of total revenue. It also comprised approximately 78% of revenue across the dominant Business sales channel.

ResMed Inc (ASX: RMD) 

A final result that caught the eye was the second quarter update from this medical device company. ResMed delivered a 9% increase in quarterly revenue to US$800 million and a 17% increase in net profit to US$206.4 million. This was ahead of the analyst consensus estimate for both revenue and earnings. Management advised that its growth was driven by a solid performance across the business. This includes its digital health business, which has been performing strongly thanks to the growing importance of out-of-hospital care.

More reading

• ASX 200 up 0.6%: ResMed Q2 update, Kogan sinks, NAB acquires 86 400
• Why Lynas, Mesoblast, ResMed, & Service Stream shares are pushing higher
• ResMed (ASX:RMD) share price on watch after solid Q2 update
• 2 small cap ASX shares growing at a quick rate
• 5 things to watch on the ASX 200 on Friday

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends BIGTINCAN FPO. The Motley Fool Australia owns shares of and has recommended BIGTINCAN FPO. The Motley Fool Australia has recommended Nitro Software Limited and ResMed Inc. 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 start of February 2021 is another opportunity to look into some ASX shares.

It has already been an interesting year in the global stock market with everything that’s going on relating to Gamestop.

These ASX shares could be ones to think about:

Pacific Current Group Ltd (ASX: PAC)

Pacific Current is a business that invests in leading global investment managers around the world.

If the investment managers manage to grow their funds under management (FUM), then Pacific Current benefits as well.

On Friday, the ASX share announced its FUM update for the three months to 31 December 2020. Pacific Current said that its FUM rose by a further 8.3% to $112.8 billion.

The company said that GQG’s assets once again posted significant increases. GQG saw its FUM rise by more than US$35 billion over the 12 months to December 2020.

In native currencies US dollar orientated fund managers saw FUM increase by 16.9%. When converting to Australian dollar, the increase was partly offset by the appreciation of the Australian dollar against the US dollar.

Pacific Current management said that in local dollars, all nine of the portfolio companies with FUM grew during the quarter, but when translated into Australian dollars only four of the nine did. Pacific’s FUM and revenue is heavily skewed towards the US dollar.

Dean Fremder of Perpetual Limited (ASX: PPT) said when Pacific Current shares were a bit lower: “The stock’s really cheap. It is on nine times earnings. It’s growing earnings at double digits, so more than 10% a year. It’s paying a 6.5% fully franked yield. And most excitingly, we think they can pay out a much larger portion of their earnings as dividends. We see no reason, given the surplus franking credits they have on the balance sheet, they can’t be paying a 10 or 11% fully franked yield in the next 12 months. So, really excited about that one.”

According to Commsec, the Pacific Current share price is valued at 10x FY22’s estimated earnings.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is another ASX share that’s involved with the funds management business.

Dr Peter Gardner from Plato Investment Management said about the ASX share and its FY20 result: “Magellan had a really good result. Their profit was up 20%. That final dividend was 10% higher than last year. What bodes well for future earnings for Magellan is that their average funds under management was up by 26% over the year. They’re actually doing really well in the current market environment. The growth stocks in the US, which they’re exposed to are doing really well.”

Not only does the fund manager have over $100 billion of FUM, which generates high levels of management fees, but it is also seeking growth in other areas.

Magellan’s own investment called Barrenjoey, a new investment bank, has just hired its latest members of the team according to reporting by the Australian Financial Review. Barrenjoey has hired two of JPMorgan’s top Australian investment bankers to run its equity capital markets unit.

Magellan has been making investments in operating businesses to make returns and provide greater levels of information to the funds management business. Barrenjoey is one investment and Guzman y Gomez is another, which is a fast food Mexican chain.

According to Commsec, the Magellan share price is valued at 16x FY23’s estimated earnings. It also has a projected partially franked dividend yield of 4.6% for FY21.

More reading

• 3 small ASX dividend shares with big yields
• Top brokers name 3 ASX shares to sell next week
• Got money to invest for dividends? Here are 3 ASX shares
• 3 little-known ASX dividend shares offering big income
• Got money to invest? Here are 3 ASX shares to buy

Motley Fool contributor Tristan Harrison 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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