The Bapcor Ltd (ASX: BAP) share price is soaring higher, up 9.5% to $8.01 this morning, after the company released a favourable trading update to the ASX.

What’s driving the Bapcor share price higher?

Today, Bapcor provided a first quarter 2021 trading update revealing a sharp increase in group revenue.

For the 5 months to the end of November, the company reported a rise in group revenue of approximately 26%. It indicated that a combination of lower interest rates, the contribution of Truckline (not included in the prior corresponding period) and less spending on discretionary expenses, like travel, saw net profit after tax (NPAT) achieve operating leverage.

In a forward-looking statement, the company forecasts revenue growth of at least 25% for the first half of FY21 compared to the first half of FY20. And it expects NPAT to increase by at least 50% over the $45.6 million achieved in FY20.

The company concurred with market consensus for full year NPAT in the range of $110-115 million. But it stressed that “uncertain economic conditions” remain in play.

Addressing the updated results, Bapcor CEO Darryl Abotomey said:

We are very pleased with the strong performance of Bapcor’s businesses. Trade and wholesale represent over 80 per cent of Bapcor’s business, with retail 20 per cent. Historically, trade focussed businesses perform solidly in difficult economic conditions – which is again borne out by Bapcor’s current performance.

In addition the changes that have been implemented in our retail business continue to gain momentum with revenue up 40 per cent over the pcp [prior corresponding period]. Initiatives include the recently launched new Autobarn store format that is delivering a significant uplift in sales…

The construction of our new Victorian Distribution Centre is progressing well with the building expected to be handed over in February 221 and the automated picking system operational in the following 6 months.

Bapcor share price and company snapshot

Bapcor Ltd (formerly Burson Group Limited) provides vehicle parts, accessories, equipment and services throughout the Asia Pacific region. The company listed on the ASX in 2014. Today it makes up part of the S&P/ASX 200 Index (ASX: XJO). Bapcor pays a 2.5% annualised dividend yield, fully franked.

With this morning’s gains, Bapcor’s share price is now up 25% year-to-date. And shares have gained 152% since the 25 March lows.

More reading

• Why 2021 may be an even better year for ASX investors
• What today’s economic outlook means for the BHP (ASX:BHP) share price
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 rises 0.7% on Wednesday
• Should I care about this week’s mid-year economic and fiscal outlook?

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. 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 Pro Medicus Limited (ASX: PME) share price has been a strong performer on Thursday.

In morning trade the leading health imaging company’s shares are up 5% to $32.75.

Why is the Pro Medicus share price racing higher?

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

According to the release, Pro Medicus has signed a five-year contract with MedStar Health worth a total of A$18 million.

MedStar Health is the largest health system in the Maryland and Washington, D.C. metropolitan region, comprising 10 hospitals.

The contract is based on a transactional licensing model and will see Pro Medicus’ complete enterprise imaging solution implemented across all of MedStar’s radiology and subspecialty imaging departments. This includes the MedStar Georgetown University Hospital.

Management believes this implementation is notable as it will provide MedStar with a fully cloud deployed environment on the Google Cloud Platform (GCP), leveraging its Visage platform’s native, cloud-engineered enterprise imaging technology.

Planning for the rollout is to commence in the second quarter of FY 2021, with the first sites scheduled to go-live in the third quarter.

A shift in thinking.

Pro Medicus CEO, Dr Sam Hupert, appeared to be very pleased with the agreement and what it could signify for the future.

He commented: “MedStar went through an extensive evaluation process including a pilot that not only benchmarked Visage 7 compared to on-premise systems from other vendors, it served to verify the speed of Visage 7 in the public-cloud.”

“Unlike systems from other vendors, Visage has been developed from the ground up for cloud deployment. Traditionally, our clients have deployed Visage in their own “private-cloud” where all images are sent to a single, central server and streamed on demand from there. This deal signifies a shift in the way U.S. healthcare providers are now starting to think about public-cloud platforms,” he added.

More reading

• These are 8 of the best performing ASX healthcare shares of 2020 so far
• ASX 200 Weekly Wrap: ASX 200 on track for a top month
• These were the worst performing ASX 200 shares last week
• Pro Medicus (ASX:PME) share price tumbles 4% after AGM
• ASX 200 events this week that could move the market

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus 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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The Uniti Group Ltd (ASX: UWL) share price has returned from its trading halt and is zooming higher.

At the time of writing, the telco’s shares are up a sizeable 13% to $1.67.

Why was the Uniti share price in a trading halt?

Uniti requested a trading halt on Wednesday so that it could undertake an equity raising to fund the acquisition of the Telstra Velocity and South Brisbane Exchange assets from telco giant Telstra Corporation Ltd (ASX: TLS).

According to the release, the two parties have agreed a fee of $140 million for the assets, with $85 million payable upon completion.

The remaining $55 million is deferred, with $20 million payable over 3 years and $35 million due following the completion of the migration of the assets and services. Though, the deal includes the ability to adjust the total purchase price subject to the size of the customer base at the time of migration.

Equity raising.

This morning Uniti announced the successful completion of its fully underwritten institutional placement.

The company raised $50 million through the issue of approximately 33.3 million shares at a price of $1.50 per new share. This represents a 1.4% premium to Uniti’s last close share price.

Management notes that the compelling strategic rationale for the acquisition of the Telstra Velocity assets has meant that the placement achieved an exceptional result of being priced at a premium.

In fact, the placement was several times oversubscribed at the placement price, with applications for placement shares received from more than 40 institutional funds.

It’s not hard to see why it was so popular. Management is forecasting the new assets to contribute $21 million in annual earnings before interest, tax, depreciation and amortisation (EBITDA), starting early January 2021.

Uniti will now push ahead with its share purchase plan, which is aiming to raise a further $10 million. This is being undertaken at the lesser of the placement price or a 2% discount to its five-day volume weight average price on 20 January.

Uniti Chairman, Graeme Barclay, commented: “We are again delighted by the strong support from our institutional shareholders. The high level of demand for placement shares priced at a premium is an endorsement of the transaction’s economics and compelling strategic rationale to expand Uniti’s core fibre infrastructure network through the acquisition of the Telstra Velocity assets.”

More reading

• 2 blue chip ASX dividend shares to buy today
• Why the Uniti (ASX:UWL) share price is on watch today
• ASX 200 Weekly Wrap: ASX 200 hits a 6! Thank iron ore
• Beat negative interest rates with these ASX dividend shares
• 5 ASX dividend shares to buy for income in 2021

Motley Fool contributor James Mickleboro 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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The Transurban Group (ASX: TCL) share price is climbing higher following the release of an announcement.

In morning trade the toll road operator’s shares are up 1% to $14.24.

What did Transurban announce?

This morning Transurban provided the market with a trading update and announced an agreement to sell a 50% interest in its Transurban Chesapeake assets.

In respect to the latter, the company has agreed to sell the 50% stake to AustralianSuper, Canada Pension Plan Investment Board, and UniSuper for gross sale proceeds of A2.8 billion (US$2.1 billion).

The deal also includes a potential earn-out between FY 2024 and FY 2026 of up to A$93 million (US$70 million).

In addition to this, its Chesapeake partners have exclusive development rights to invest alongside Transurban on future brownfield and greenfield growth opportunities in the Commonwealth of Virginia, State of Maryland and Washington D.C., as well as enhancements to existing concessions.

What are the Chesapeake assets?

Transurban’s Chesapeake assets comprise its Greater Washington Area (GWA) operational assets, which include the 495 Express Lanes, 95 Express Lanes, and 395 Express Lanes.

There are also three projects in delivery and development. These are the Fredericksburg Extension, 495 Express Lanes Northern Extension, and the Capital Beltway Accord.

Transurban’s Chief Executive Officer, Scott Charlton, believes the realisation of the long-held capital strategy will position its North American business for the next stage of its growth.

He commented: “This transaction realises significant value for security holders while enabling accelerated growth in North America and Australia, where we see a number of opportunities starting to materialise. The Transurban Chesapeake partners are committed to growing alongside Transurban in North America and we look forward to pursuing new opportunities with their financial and strategic support.”

Trading update.

The release also reveals that despite the ongoing impacts of COVID-19, as a whole, traffic on its toll roads increased through October and November.

On CityLink in Melbourne, traffic has shown progressive improvement as government restrictions have been gradually eased over the period.

Things aren’t quite as positive in North America. Traffic on its North American roads remains subdued given the continued impacts of COVID-19. This is particularly the case on its Express Lanes assets.

Also of note, in Sydney, the NorthConnex tunnels opened to traffic on 31 October.

More reading

• 3 top ASX dividend shares to buy
• What’s lifting the Transurban (ASX:TCL) share price today?
• ASX 200 Weekly Wrap: ASX 200 hits a 6! Thank iron ore
• Top ASX shares to buy in December 2020
• 2 defensive ASX dividend shares for income

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. 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 morning trade the Adbri Ltd (ASX: ABC) share price is pushing higher following the release of an announcement.

At the time of writing, the building materials company’s shares are up 2% to $3.50.

What did Adbri announce?

This morning Adbri announced that its Kwinana Upgrade Project has been given the go ahead after a final investment decision by its board.

The Kwinana Upgrade Project will see the company make a $199 million investment in a modern state-of-the-art facility that will consolidate Adbri’s two existing cement production sites into a single operation.

This operation will serve the Western Australia market and increase annual production capacity to 1.5 million tonnes per annum from 1.1 million tonnes.

Management believes this investment demonstrates the company’s commitment to and confidence in Western Australia’s mining and construction sectors, which are projected to grow over the coming years.

What are the benefits of the project?

As well as increasing its production capacity, the investment will strengthen Adbri’s long-standing position as one of Western Australia’s leading low-cost suppliers of cementitious materials well into the future.

It is projected to deliver cash cost savings of approximately $19 million for the first year post commissioning. This will be generated through lower energy, maintenance, and transport, which will lower unit production costs to enhance competitiveness.

In addition to this, the operation is expected to have a 20% lower carbon footprint than existing operations. This will be through reduced road transport and a more efficient plant.

Overall, the company estimates the net present value of the benefits to be in excess of $125 million, with an internal rate of return (IRR) of more than 15%. This is well above Adbri’s cost of capital.

Adbri’s CEO, Nick Miller, commented: “Our Munster and Kwinana cement operations have helped build Western Australia for over half a century, supplying a vital material to the construction and mining sectors. The Kwinana Upgrade Project represents a $199 million investment that will modernise our cement production capabilities, create employment opportunities during the construction phase and support the long-term growth of the Western Australian mining and construction sectors.”

“The Kwinana Upgrade Project will enable us to continue providing high quality products to the local market. It will significantly enhance our business, both by lowering our operating costs and decreasing our carbon emissions, while at the same time providing an attractive return on the investment for our shareholders,” he concluded.

More reading

• Why the Adbri (ASX:ABC) share price has dipped in trading today
• What you need to know about the RBA’s rate decision today

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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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.

The coronavirus pandemic is causing disruptions in Coca-Cola‘s (NYSE: KO) operations, without a doubt. Local governments have asked many restaurants and entertainment venues to either shut their doors completely or operate at significantly reduced capacity. That’s hurting sales because those are places where people consume many of Coca-Cola’s drinks. 

Still, when investing in a company, it is best to look at the long term. With positive developments on a coronavirus vaccine, it appears that there will be a return to normalcy sometime after the summer of 2021. Let’s look at the company’s prospects and determine if it’s a good time to buy the stock. 

Prospects

Sales for Coca-Cola are struggling to recover as people worldwide are facing a recent surge of coronavirus cases. Still, CEO James Quincey, in the company’s third-quarter earnings release, said: “While many challenges still lie ahead, our progress in the quarter gives me confidence we are on the right path.”

Indeed, there are challenges. Coca-Cola’s year-to-date cash flow from operations is down 20% from the year before.

Over the longer run, the company faces a headwind from people shifting away from sugary beverages. Moreover, the COVID-19 pandemic may leave some lingering long-term effects that will be negative for Coca-Cola. For instance, government stay-at-home orders may cause many restaurants to go out of business, which would hurt Coca-Cola consumption. 

That being said, Coca-Cola is a proven company with a decades-long history of quenching customers’ thirst for tasty beverages. When the pandemic fades away, and people are comfortable leaving their homes again, consumption of the company’s beverages will increase from current levels.

Coca-Cola is a leading player in the non-alcoholic drinks market, which is forecast to have a compounded annual growth rate of 6.8% over the next five years. 

Coca-Cola is not going to be growing revenue by double digits for any meaningful period of time. However, if it can grow sales in the middle to low single digits, that’s enough for shareholders to have confidence in the company’s recovery.

Valuations and profit margins 

PE = price-to-earnings, PS = price-to-sales, EV = enterprise value, EBITDA = earnings before interest, taxes, depreciation, and amortization. Data source: YCharts.

Coca-Cola is priced at a premium compared to its primary competitor PepsiCo (NASDAQ: PEP)(see chart above). However, that premium has narrowed since the start of the year, as PepsiCo’s snack segment has helped it fare better during the pandemic. Moreover, that premium may be justified if you account for Coca-Cola’s better operating performance. 

If you compare Coca-Cola to PepsiCo in terms of profit margins, Coca-Cola is clearly the winner (see chart below). This is especially true for operating profit margin. Admittedly, when both companies complete their fiscal year 2020, PepsiCo will likely narrow the differences. However, that might reverse when the pandemic has faded away. Coca-Cola generates more of its revenue from people consuming its products away from home than PepsiCo, and subsequently is more negatively affected by the pandemic.

The verdict

Coca-Cola is a long-running business success story, making shareholders richer while delighting consumers with tasty drinks for decades. The COVID-19 disease is creating difficulties that are slowing down sales in the near term. However, with vaccines against the virus rolling out in the US and other parts of the world, it could see operations return to normalcy by the end of 2022.

Meanwhile, the disruptions allow you to buy a superior consumer staples stock at a relatively small price-to-earnings (P/E) ratio premium over its competitor. Interested investors can feel good about starting a position in Coca Cola at these levels.  

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

More reading

• Can these fund managers drive the Coca-Cola Amatil (ASX:CCL) share price 10% higher?
• Fund king Ray Dalio ditches China for Coke (NYSE:KO)
• Like oysters? New ASX company forecasts 300% growth

Parkev Tatevosian 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 ASX share market is being dogged by worries of an imminent correction, but some experts believe the ASX is set to outpace its global peers in 2021.

Make no mistake, valuations of ASX shares are looking overstretched on several metrics after its rapid rebound since March.

The S&P/ASX 200 Index (Index:^AXJO) surged by nearly 50% since its COVID‐19 low and rocketed by a record breaking 10% in November alone!

The top large cap performers of 2020 include the Afterpay Ltd (ASX: APT) share price, Fortescue Metals Group Limited (ASX: FMG) share price and Xero Limited (ASX: XRO) share price.

Outlook for ASX shares brightens in 2021

Impressive as this sounds, the ASX 200 still hasn’t quite fully regained all its lost during the COVID market meltdown. It’s still around 7% below its February peak and is a laggard compared to global peers such as the S&P 500 Index (INDEXSP: .INX), which hit new record highs.

But don’t sell your ASX stocks just yet. Next year could be the time when the ASX really shines, reported Bloomberg.

ASX 200 tipped to break new records

Strategists from AMP Ltd (ASX: AMP) and Commonwealth Bank of Australia (ASX: CBA) are tipping the ASX to break record highs in 2021. Further, Macquarie Group Ltd (ASX: MQG) is forecasting double-digit returns for ASX investors, according to the article.

The bullish assessment is fuelled by the belief that a successful COVID vaccination program will be rolled out. This will give cyclical shares a big boost and the ASX 200 is stacked with cyclicals.

Cyclicals are stocks that are most correlated to economic growth, such as miners and banks. These make up around half of our top 200 benchmark.

Earnings for ASX 200 forecast at 20% in 2021

The path of least resistance for global GDP growth is up. It’s hard to think it could go any lower from the 2020 recessionary levels. The global economy is expected to contract by 4.9% this year but will surge back into the black to the tune of 5.4% in 2021.

That will still put it around 6.5 percentage points below what the International Monetary Fund was expecting for 2020 before COVID, but it’s the change in growth rates that’s exciting analysts.

The sharp turnaround in 2021 is the key reason why Morgan Stanley and Macquarie are expecting earnings of ASX 200 stocks to jump by 20% on average. If this comes to pass, it would mark the best earnings expansion since 2016, added Bloomberg.

“Just as 2020 was dominated by the pandemic and this determined the relative performance of investment markets and stocks, 2021 is likely to be dominated by the recovery,” Bloomberg quoted Shane Oliver, the head of investment strategy at AMP Capital.

Australian shares are “likely to be relative outperformers.”

More reading

• What today’s economic outlook means for the BHP (ASX:BHP) share price
• 5 things to watch on the ASX 200 on Thursday
• The Tyro (ASX:TYR) share price is down 20% in one month. Time to buy?
• ASX 200 rises 0.7% on Wednesday
• Should I care about this week’s mid-year economic and fiscal outlook?

Brendon Lau owns shares of AMP Limited, Commonwealth Bank of Australia, and Macquarie Group Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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 Australian economy has shown further signs of recovery as its retail sector bounces back to pre-COVID levels.

October retail trade estimates of turnover and volumes for retail businesses, including store and online sales, rose 1.4% month-on-month or 7.1% higher compared to October 2019. The resilience and recent strength of retailers has drawn a series of broker upgrades. Here are the ASX200 shares that have been upgraded this week. 

Harvey Norman Holdings Limited (ASX: HVN) 

Credit Suisse raised its Harvey Norman share price target from $5.06 to $5.30 with an outperform rating. This represents a 16% upside to its closing price on Wednesday of $4.570. The broker predicts that the work from home trend will stick and provide further upside potential to earnings. 

More recently, on 25 November, Harvey Norman updated the market with its year-to-date profit and sales figures. Its aggregated sales revenue increased 28.2% for the period from 1 July 2020 to 21 November 2020 when compared to the prior corresponding period. Similarly, its unaudited preliminary profit before tax for the period 1 July 2020 to 31 October 2020 had jumped more than 160.1%. 

JB Hi-Fi Limited (ASX: JBH) 

Similarly, Credit Suisse also upgraded its JB Hi-Fi rating from neutral to outperform, and share price target from $50.62 to $53.02. The price target is just below the JB Hi-Fi’s previous record all-time high of $52.99 set in early October. 

The broker was pleased with the company’s strong balance sheet and low debt levels. Credit Suisse anticipates the work from home trend to continue and support earnings growth. 

Michael Hill International Ltd (ASX: MHJ) 

The Michael Hill share price jumped almost 20% last Thursday after a strong first quarter update. This update highlighted strong same store sales growth of 7.9% for the 22 week period ended 29 November 2020. As such, all markets achieved a significant lift in sales, resulting in online sales increasing 110% for the 22-week period. 

Despite the temporary store closures and ongoing foot traffic impacts on the key Christmas trading period, the company currently expects to deliver an EBIT result for first-half FY21 to materially exceed the prior year half one result.

The update exceeded Citi’s expectations and the broker raised its price target from $0.50 to $0.620 with a neutral rating. This represents a 6.8% upside to its closing price on Thursday of $0.580. 

More reading

• ASX 200 falls on Tuesday
• ASX 200 down 0.1%: APRA removes bank dividend restrictions, Fortescue slides, Zip higher
• Zip (ASX:Z1P) share price rises on Harvey Norman (ASX:HVN) partnership
• Aussie dollar breaking to new 30-month high will boost these ASX stocks
• JB Hi-Fi (ASX:JBH) share price lifts today on broker rating upgrade

Motley Fool contributor Lina Lim 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 Crown Resorts Ltd (ASX: CWN) share price is on watch this morning after the entertainment and gaming company received a liquor licence for its Crown Sydney resort.

After market close yesterday, the Crown share price finished the day at $9.85, up 1.2%.

What did Crown announce?

In the release, Crown advised that the New South Wales Independent Liquor and Gaming Authority (ILGA) has approved Crown Sydney for a liquor licence.

The new permit is on an interim basis for non-gaming areas in the building such as the hotel, bars and some restaurants. The liquor licence is valid from yesterday’s update to 30 April 2021.

Crown will need to re-apply in order to extend its liquor licence for the period of 1 May 2021 and thereafter. This will allow the ILGA to assess suitability on whether to grant further approval following the ILGA enquiry. The outcome of the report is due early next year.

As Crown Sydney’s casino remains closed until February 2021, the company is finalising its pre-opening activities for non-gaming areas. It is expected that it will open its doors to the public from 28 December 2020.

What did the liquor and gaming authority say?

ILGA chair Phillip Crawford said the authority was considering a further two liquor licences for other non-gaming areas of the casino, with a final decision expected within the week.

He went on to say:

The licence issued today will allow Crown to serve alcohol at the Crown Sydney resort, which includes a number of bar areas. The additional licence applications still to be determined apply to two restaurants at Crown Sydney.

Crown share price summary

The Crown share price has had a bumpy ride for the last 6 months, following COVID-19 restrictions,  the recent money laundering investigation and class action lawsuits launched by shareholders.

While its shares are trading materially lower than its normal range of around $11 to $13, investors wil no doubt be hoping the worst is behind the company. Crown reached a 52-week high of $12.71 in January before falling to a decade low of $5.84 in March.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Crown Resorts (ASX:CWN) woes continue with latest lawsuit
• Crown Resorts (ASX:CWN) share price falls as Austrac calls junkets high risk
• Here’s why the Crown (ASX:CWN) share price is pushing higher today
• Crown Resorts (ASX:CWN) share price is up 6% despite Fitch downgrade

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Crown Resorts 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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The three ASX tech shares in this article may be exciting to some investors and could be worth watching:

Altium Limited (ASX: ALU)

According to the ASX, Altium has a market capitalisation of $4.4 billion.

Altium is an electronic PCB software design business that is one of the leading players across the world. Jason Kururangi of Aberdeen Standard Investments recently said that Altium was a buy as a long term investment.

Altium has a few leading offerings in its portfolio including Altium Designer and Octopart.

The company is aiming for market domination of its industry by 2025 with a goal of 100,000 Altium Designer seats. It wants to win over the industry like Microsoft did with office software. Altium is hoping to reach US$500 million of revenue by 2025 (or perhaps 2026 because of COVID-19 impacts).

COVID-19 hurt growth in FY20 as it found it harder to win new customers during the final quarter. This led to price discounts and longer payment terms. However, it still managed to grow normalised earnings per share (EPS) by 5%.

In FY21, before the sale of the TASKING business, the ASX tech share was expecting to grow revenue by 6% to 12% to US$200 million to US$212 million with an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of between 38% to 42%.

The company is looking to shift the business towards the cloud with its Altium 365 product.

According to Commsec projections, Altium is trading at 44x FY23’s estimated earnings.

Temple & Webster Group Ltd (ASX: TPW)

According to the ASX, Temple & Webster has a market capitalisation of $1.1 billion.

This ASX tech share is a growing e-commerce player that sells a wide range of furniture and homewares.

FY20 was a year of strong growth for the company. Many shoppers had to go online for their products with plenty of physical retail stores shut for some period of time during 2020.

Over FY20, it reported revenue growth of 74% to $176.3 million. Revenue grew 94% in the second half of FY20 and 130% in the fourth quarter. It also grew its EBITDA by 483% to $8.5 million. The ‘adjusted EBITDA’ margin improved from 2.5% to 5.3%.

Management were pleased to generate such strong growth whilst keeping a high level of customer satisfaction. Active customers grew 77% year on year.

The growth has continued into FY21. Between 1 July to 19 October, the ASX tech share had delivered revenue growth of 138% and it had generated $8.6 million of EBITDA in the first quarter of FY21.

The contribution margin was ahead of its 15% target and customer satisfaction remained at record levels with a net promoter score of around 70%.

Temple & Webster said that it’s committed to a high growth strategy to take advantage of the structural shift towards online shopping.

According to the Commsec, Temple & Webster is valued at 34x FY22’s estimated earnings.

Redbubble Ltd (ASX: RBL)

According to the ASX, Redbubble has a market capitalisation of $1.7 billion.

Redbubble is an online marketplace business that sells a wide variety of artist-produced products like wall art, clothes, phone cases and masks.

In FY20 Redbubble grew its marketplace revenue by 36% to $349 million. Gross profit went up 42% to $134 million and operating EBITDA surged 141% to $15.3 million. It generated $38 million of total free cashflow in FY20. During the locked-down fourth quarter of FY21, the ASX tech share’s marketplace revenue grew 73%, gross profit rose 88% and it made $8.4 million of operating EBITDA.

At the time of the FY20 result, Redbubble Martin Hosking said: “RB Group’s on-demand fulfilment model and differentiated consumer offerings provide us with distinctive advantages. The strong financial performance follows from these fundamentals. It has been pleasing to see the acceleration of existing trends in the last few months. 2021 represents a year of opportunity for the business. We are positioned to build on a decade of momentum and aggressively pursue the global opportunity presented by the shift to online activity and increasing adoption of e-commerce platforms.”

Redbubble’s growth also continued into the first quarter of FY21 – marketplace revenue was up 116% to $147.5 million, gross profit grew 149% to $64.5 million, it made $22.1 million of earnings before interest and tax (EBIT) and Redbubble generated $27.1 million of operating cashflow.

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Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. 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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