If you are interested in investing in some promising mid cap shares, then you may want to take a look at the two listed below.

Both have a lot of potential and have been rated as buys recently. Here’s what you need to know about these ASX shares:

Adore Beauty Group Limited (ASX: ABY)

The first mid cap share to look at is Adore Beauty. It is a growing online beauty retailer that has almost 600,000 active customers in an Australian beauty and personal market worth ~$11 billion a year.

Analysts at Morgan Stanley are big fans of the company and believe its shares are in the buy zone right now. Particularly given how far they have fallen from their IPO price of $6.75 late last year.

Due to the growing popularity of its website and the ongoing shift to online shopping, Adore Beauty has been tipped for strong growth in the coming years.

Morgan Stanley has an overweight rating and $8.35 price target on the company’s shares. This compares to the current Adore Beauty share price of $6.17.

ELMO Software Ltd (ASX: ELO)

Another mid cap ASX share to look at is ELMO. It is a cloud-based human resources and payroll software company.

ELMO’s software gives businesses a unified platform to streamline processes such as employee administration, recruitment, and payroll. It has recently been bolstering its offering with the acquisitions of Webexpenses for 13 million pounds and Breathe for $32 million.

The acquisition of these UK based businesses has gone down reasonably well with analysts at Morgan Stanley. The broker was also pleased to see that management has reiterated its organic growth guidance for FY 2021.

So much so, Morgan Stanley has recently put an overweight rating and $9.70 price target on its shares. This compares to the latest ELMO share price of $7.00.

More reading

• 2 stellar mid cap ASX growth shares to buy right now
• These ASX growth shares could give your portfolio a big boost
• What’s in store for the ASX tech sector in 2021?
• What does 2021 hold for ASX retail shares?
• 2 fantastic ASX growth shares that could beat the market in 2021

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Elmo Software. The Motley Fool Australia owns shares of and has recommended Elmo Software. 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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Is the National Australia Bank Ltd (ASX: NAB) share price a buy right now?

It has been a strong-performing blue chip over the past three months, rising by 27%.

In November we learned the news that the BioNTech-Pfizer, Moderna and University of Oxford-Astrazeneca vaccines all showed promising effects against COVID-19.

Looking back on the last result, NAB’s FY20 saw cash earnings fall 36.6% to $3.71 billion. Excluding large notable earnings, cash earnings dropped 25.9% to $4.7 billion. It made $2.56 billion of statutory profit and its CET1 ratio was 11.47%, making it unquestionably strong using the regulator’s benchmark. The final dividend was cut to just $0.30 per share, bringing the full year dividend to $0.60 per share.

Rhett Kessler from the Pengana Australian Equities Fund, of Pengana Capital Group Ltd (ASX: PCG), thinks that the banks have a positive outlook.

The first reason is that there’s accelerating home loan growth supported by low interest rates and first homeowner support. Indeed, at the moment the official Australian interest rate set by the Reserve Bank of Australia is just 0.25% right now.

The second reason, or group of reasons, is that there’s a supportive federal budget, improving housing finance approvals and house prices are holding up better than expected.

The third reason was that there has been a meaningful reduction in loan deferrals.

The final reason is that there is lower than anticipated loss provisioning.

Those factors were key for causing Pengana to increase its exposure to the major banks.

APRA action on dividends

Whilst all of those points relate to the profit generated by banks like NAB, there is the possibility of higher dividends in 2021 after the Australian Prudential Regulation Authority (APRA) lifted the limit about how much of a dividend that banks could pay. Previously, banks had to hold onto half of their statutory earnings.

However, APRA does still expect banks to take a prudent approach.

APRA Chair Wayne Byres said: “A decade-long process of increasing capital levels and bolstering resilience in the banking system has put Australian banks in their current position of strength, allowing the sector to support customers and the broader economy at a time of crisis.

“The results of APRA’s extensive ADI stress testing provide reassurance that the banking system remains well positioned to absorb the impact of a severe economic shock and retain the capacity to continue supplying credit into the economy.”

Based on estimates on Commsec, NAB is projected to pay an annual dividend per share of $0.89 in FY21, equating to a fully franked dividend yield of 3.7%.

Is the NAB share price a buy?

Using the CommSec estimate for NAB’s earnings, the NAB share price is valued at 19x FY23’s estimated earnings.

Broker Credit Suisse thinks that NAB shares are worth a buy at this stage because of improving earnings and a stronger dividend. As the year progresses, the broker believes investors will take into account the bigger dividend and better earnings.

Using Credit Suisse’s forecast for FY21, the NAB share price puts it on 17x FY21’s estimated earnings with a forward fully franked dividend yield of 3.6%.

More reading

• ASX 200 Weekly Wrap: Change in America spurs ASX 200 higher
• This top broker thinks the NAB (ASX:NAB) share price is a strong buy
• 5 things to watch on the ASX 200 on Tuesday
• ASX dividends: Are miners the new bank shares?
• ASX 200 Weekly Wrap: ASX drops despite promises of more US stimulus

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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The Meridian Energy Ltd (ASX: MEZ) share price is currently trading at $7.17, down 8.02% at the time of writing. Meridian shares have come under pressure today after the electricity company released its monthly update for December 2020.

We take a closer look at today’s update and what else the company has been up to recently.

More about Meridian Energy

Meridian Energy is the largest electricity producer in New Zealand and generates an estimated 35% of the country’s electricity. All of the electricity generated by Meridian Energy comes from 100% renewable sources — water, wind, and sun. New Zealand customers receive grid-supplied electricity, which is a combination of renewable and non-renewable sources. 

Meridian Energy Australia shares the same principles and reiterates the company’s commitment to reducing the reliance on fossil fuels in order to minimise climate change and pollution.

The company trades on both the ASX and the NZX.

What’s moving the Meridian Energy share price today?

Meridian Energy shares have lost power after the release of today’s report, which noted that electricity demand in the last 12 months was 1.2% lower than the preceding 12-month period. It was 0.9% lower comparing the month of December 2020 to the month of December 2019. 

The company believes these dips may be a product of a dry and mild season with average temperatures.

The 12-month average for customers switching providers without moving house was 6.3% at the end of December 2020. The 12-month average for customers that switched providers via a move was 12.9% at the same time.

Compared to the second quarter of 2020, Meridian Energy’s Australian retail sales volumes were 18% higher at a 17% lower average price. In New Zealand, volumes were up 13.6% at a 3.6% higher average price during for same period.

Any other news out of Meridian Energy?

In addition, Meridian Energy released a second announcement today stating that Blackrock Inc now holds a 7.09% stake in the New Zealand business. Prior to this, Blackrock held a 6.07% stake.

Whether or not this activity miffed investors is impossible to tell. However, when big institutions increase their holdings in any company, it’s not uncommon for the market to take notice.

Looking at the previous six-month timeframe, the Meridian Energy share price has shot up over 75%, giving the company a current market capitalisation of $19.98 billion.

More reading

• Why the Meridian (ASX:MEZ) share price is dropping lower today
• ASX 200 rose 1.6%
• Here’s how ASX renewable energy shares have performed in 2020

Motley Fool contributor Gretchen Kennedy 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 Piedmont Lithium Ltd (ASX: PLL) share price was on fire again on Wednesday and stormed notably higher.

At one stage, the US-based lithium miner’s shares were up as much as 32% to a new record high of 82 cents.

The Piedmont Lithium share price ultimately closed the day 28% higher at 80 cents. This means its shares are now up 515% from 13 cents a year ago.

Why did the Piedmont Lithium share price rocket higher?

Investors were buying Piedmont Lithium shares despite there being no news out of the company today.

However, a number of lithium miners were on the charge today as investor interest in the sector continues to heat up.

For example, the Vulcan Energy Resources Ltd (ASX: VUL) share price jumped 20% and the Lake Resources N.L. (ASX: LKE) share price stormed 55% higher.

What’s been happening at Piedmont Lithium?

It certainly has been a busy few months for Piedmont Lithium.

The most recent development out of the company came earlier this month when it announced an investment into fellow lithium miner Sayona Mining Ltd (ASX: SYA).

As part of the deal, the two companies have signed a strategic partnership that will accelerate the development of Sayona’s lithium projects in Québec, Canada.

The two companies have also agreed a binding offtake arrangement under which Piedmont Lithium will acquire up to 60,000 tonne per annum of spodumene concentrate or 50% of Sayona Québec’s production, whichever is greater.

That spodumene concentrate could end up being put into the batteries of Tesla vehicles. Late last year it signed a binding sales agreement with Tesla.

The two parties have signed an initial five-year term for the supply of spodumene concentrate (SC6) from Piedmont Lithium’s North Carolina deposit. The deal also includes the option for a further five-year extension by mutual agreement.

What’s next?

The next major milestone to keep your eyes open for is the definitive feasibility study (DFS) at the Piedmont Lithium Project.

This is scheduled to be complete in the middle of the calendar year. The company’s President and CEO, Keith D. Phillips, is optimistic that it is sitting atop an asset that will benefit greatly from the electric vehicle (EV) revolution.

He said: “The Carolina Tin-Spodumene Belt is one of the world’s most prolific lithium belts and we are hopeful that we will ultimately delineate North America’s largest spodumene resource, ideally located in North Carolina to power North America’s clean energy storage and EV revolution.”

More reading

• Zip and Vulcan were among the most traded ASX shares last week
• Why Booktopia, Nitro, Reliance, & Vulcan shares are charging higher
• Why the Vulcan (ASX:VUL) share price is storming 12% higher today
• Why IDP Education, Lake Resources, Mach7, & Tyro shares are shooting higher
• Here’s why the Lake Resources (ASX:LKE) share price is rocketing 24% 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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Shares in the Little Green Pharma Ltd (ASX: LGP) are rocketing higher today. This comes after the company announced it has won a contract award with the French Government.

During morning trade, the Little Green Pharma share price reached within a whisker of its all-time high of 68 cents. Its shares topped out at 67 cents, before pulling back to 64 cents, up 10.3%.

What did Little Green Pharma announce?

In today’s release, Little Green Pharma advised that it has been selected as the primary supplier of medicinal cannabis oils for a national French medicinal cannabis trial.

The new appointment will see the company partner up with French leading pharmaceutical distributor, Intsel Chimos.

Little Green Pharma will begin a 2-year trial to supply its medicinal cannabis products for the treatment of clinical conditions. The study will look at the efficacy and safety of up to 3,000 patients undertaking medicinal cannabis therapy.

The company highlighted that as a result of being selected for the trial, it will create a significant first-mover advantage. The study is currently the only pathway for medicinal cannabis to be supplied to the French market.

If successful, Little Green Pharma estimates that the legalised medicinal cannabis sector could potentially be worth €4 billion (AUD$6.3 billion) annually.

Words from the managing director

Little Green Pharma managing director Fleta Solomon welcomed the new deal, saying:

We are very proud of our partnership’s success in the French national tender and see this tender win as strong evidence of LGP successfully implementing its export-led global sales strategy and demonstrating the benefits of Australian Good Manufacture Practices (GMP) quality manufacturing in global pharmaceutical markets.

We believe the trial will demonstrate the partnership’s credibility and reliability to the French medical community, giving both companies a significant competitive advantage once medicinal cannabis is legalised in France.

…We trust this marks the beginning of a long and rewarding partnership as we look to grow and cement our reputation amongst French patients and prescribers as a world-class medicinal cannabis supplier.

How has the Little Green Pharma share price performed?

The Little Green Pharma share price has travelled 82% higher since listing on the ASX boards in February 2020.

In March last year, the company’s shares took a dive to 17 cents from the impacts of COVID-19. However, in the following months, its shares have rebounded to now be within reach of breaking its all-time high record.

More reading

• What does the Biden administration mean for ASX shares? 

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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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Corporate Travel Management Ltd (ASX: CTD)

According to a note out of Credit Suisse, its analysts have upgraded this corporate travel specialist’s shares to an outperform rating with an improved price target of $22.00. The broker is expecting Corporate Travel Management’s performance to improve greatly in FY 2022 thanks to market share gains, pent-up demand, and higher levels of profitability. Based on this, it estimates that its shares are changing hands for ~25x FY 2022 earnings today, The Corporate Travel Management share price is currently trading at $17.17 this afternoon.

Harvey Norman Holdings Limited (ASX: HVN)

Analysts at Morgan Stanley have upgraded this retail giant’s shares to an overweight rating with an improved price target of $6.00. According to the note, the broker has been looking at the retail sector and believes Harvey Norman is well-placed to benefit from growing demand for household goods such as appliances and furniture. This is expected to underpin generous dividend payments over the coming years. The Harvey Norman share price is trading at $5.38 today.

Vocus Group Ltd (ASX: VOC)

A note out of Goldman Sachs reveals that it has a conviction buy rating and $4.70 price target on this telco’s shares. According to the note, Vocus is Goldman’s preferred pick in the telco sector. It notes that it is entering the third and final year of its turnaround strategy and is the only large telco to be growing earnings. This is being driven by strong execution in its Vocus Network Services division. The broker expects Vocus to deliver first half EBITDA growth of 1% to $192 million before growing it 3% for the full year to $393 million. The Vocus share price is fetching $4.20 this afternoon.

More reading

• This ASX company will double its earnings this year: fundie
• Why ASX travel shares like Webjet (ASX:WEB) fell lower on Monday
• Brokers name 3 ASX shares to buy right now
• Why this top broker thinks the Telstra (ASX:TLS) share price could surge ~40%
• With retail sales numbers rising, how are these 3 ASX shares performing?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management 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 Regional Express Holdings Ltd (“Rex”) (ASX: REX) share price is rising today. The Rex share price is currently trading at $1.76 a share — that’s a 2.92% gain for the day and a gain of more than 50% over the past year.

As the smallest of Australia’s three airlines sets its sights on the major cities, let’s take a look at its recent moves and the latest news out of the industry.

Rex celebrates Australia Day in Sydney with no sign of Qantas or Virgin

During yesterday’s Australia Day celebrations, some Sydneysiders would have been surprised to see a Rex airplane soaring over the Sydney Harbour.

According to today’s Australian, this annual tradition is usually carried out by Qantas Airways Limited (ASX: QAN), which zooms through in an A380 and hands Tim Tams out at the luggage carousels.  

In the past, Virgin Australia has also joined the Australia Day celebrations, serving up classic Aussie treats in its lounges.

With neither bigger sibling making an appearance this year, Rex seized the opportunity to promote its latest fleet addition, a Boeing 737.

Rex gears up to compete with Qantas and Virgin Australia

Starting 1 March, borders permitting, Rex will operate its first Sydney–Melbourne flight. Following the Easter holiday, Rex intends to add Brisbane flights as well.

Earlier this month, the Australian Financial Review (AFR) published a commentary questioning whether Rex is strong enough to compete in this space. It argues that  between the aggressive business strategy of Qantas combined with the new set of private equity hands steering the Virgin Australia ship, Rex might be out of its depth.

A second commentary at the AFR published 18 January takes the opposite position. It states that with a company history that dates back 70 years, there’s no better contender to face up to the bigger players. The article points out that Rex has made operational profits every year since the 2004 financial year and “is probably one of only three listed airlines in the world that has been able to do so”.

Navigating an industry in flux

As Rex positions itself in Sydney, Qantas and Virgin Australia prepare for new competition. Both companies are also currently dealing with border closure problems caused by international flight restrictions, an issue Rex doesn’t have.

As reported by the AFR, Virgin Australia recently proposed an ‘AviationKeeper’ pitch to the government. Via a joint letter written with the Transport Workers’ Union and Australian Services Union, the letter proposed that if international borders remain closed for the next year, an ‘AviationKeeper’ scheme must be enacted to support the industry.

Qantas was asked if it wanted to sign the letter and the company declined.

The Qantas share price has taken a roughly 28% beating over the past 12 months. At time of writing, the Qantas share price is $4.67, down just over 2%.

In comparison, the Rex share price is up nearly 3% today and has climbed more than 57% over the past year.

More reading

• Why ASX travel shares like Webjet (ASX:WEB) fell lower on Monday
• Aussies ready to splash on travel, entertainment, cars
• Risk vs uncertainty: why one is a lot worse
• End Qantas-Virgin duopoly, says ACCC
• Either Rex or Virgin will perish: Qantas boss

Motley Fool contributor Gretchen Kennedy owns shares of Qantas Airways Limited. 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 Novonix Ltd (ASX: NVX) share price has been on a rollercoaster ride in Wednesday’s trade. 

Shares in the Aussie lithium-ion battery group jumped to a new record high of $4.23 per share in early trading, before crashing to a low of $2.95. That’s a drop of almost 15%.

At the time of writing, the Novonix share price has recovered slightly and is currently trading at $3.34, down 7.5%.

Why is the Novonix share price wobbling today?

Novonix is an integrated developer and supplier of high-performance materials, equipment, and services for the lithium-ion battery industry.

In the absence of any fresh announcements to the ASX, could the volatile Novonix share price movement be down to the latest company announcement on 21 January?

In that release, Novonix advised its wholly owned US-based subsidiary, PUREgraphite, has been selected to receive a ~US$5.6 million grant by the US Department of Energy (DOE) for new technology development.

The grant funding will support the development of high efficiency furnace technology for lithium-ion battery synthetic graphite material.

Novonix chief executive, Dr Chris Burns, was positive about the grant. Dr Burns said the new furnace technology will be “industry leading” and “state of the art” in energy efficiency, environmental impact and capital cost.

Investors snapped up the company’s shares following that announcement, and the surge continued this morning before this afternoon’s dramatic plummet.

Foolish takeaway

Despite today’s rollercoaster ride today, the Novonix share price remains up 150 per cent this month.

Novonix has recorded steady revenue growth in recent years, with total income climbing from $0.10 million in June 2017 to $5.04 million in June 2020. The strong momentum throughout January has also seen above average trading volumes.

Novonix’s 5-day average trading volume is sitting at 9.3 million through to 27 January compared to an average of 3.2 million according to ASX data.

More reading

• The Syrah (ASX:SYR) share price is up 8% today. Here’s why
• Why the Novonix (ASX:NVX) share price rocketed 36% higher to a record high
• Here’s why the Novonix (ASX:NVX) share price is surging 17% higher
• These 3 ASX shares all posted massive gains today

Motley Fool contributor Ken Hall 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.

If you’re in the market for an investment in the chip industry, you’ve likely considered powerhouse players Qualcomm Inc (NASDAQ: QCOM) and NVIDIA Corporation (NASDAQ: NVDA). The former has a long history dominating the cellular chip space, and the latter is currently a leader in the graphics processing unit (GPU) market. 

Both tech companies are positioning themselves to benefit from long-term chip trends, but which is a better buy right now? Let’s take a closer look at what each is doing to grow its business to find out. 

The case for Qualcomm 

Qualcomm’s bread and butter for many years has been the company’s long list of 3G and 4G patents that it collected royalties on from device makers. Qualcomm was involved in several years-long battles with other tech companies over how much it receives for its patent royalties, but much of that has been settled now. 

The company’s chip business is still alive and well and sales to device makers, including Apple, Samsung, and Xiaomi, account for about three-quarters of the company’s total revenue. The rest of the company’s sales come from its licensing business, which still brings in most of Qualcomm’s profit. 

Qualcomm is banking on the next wave of cellular devices, 5G smartphones, as a potential catalyst for its business. While 5G could take a few years to fully take off, Qualcomm already has 110 5G agreements with smartphone makers and all of the major handset manufacturers for its 5G licensing. 

Qualcomm is optimistic that 5G could boost its business because it estimates that the number of 5G-enabled smartphones will grow 150% this year. 

The case for NVIDIA

NVIDIA’s core business is designing graphics processors for gaming and data centers. The company’s GPUs do a fantastic job of processing images and graphics quickly, which makes them great for gaming and for artificial intelligence processing as well. 

Tech companies are increasingly needing to use GPUs to help assist other processors and, as a result, NVIDIA’s data center sales grew an astonishing 162% in the most recent quarter (reported on Nov. 18). Meanwhile, NVIDIA’s GPU sales in the gaming market continue to grow as well. The company’s gaming segment revenue grew 37% in the most recent quarter and still represents 48% of the company’s total sales.

The long-term opportunities for NVIDIA come from the ways its chips can be used by other tech companies and its current market position over competitors like Advanced Micro Devices. Not only is NVIDIA a GPU leader, but its chips are tapping into long-term growth trends in gaming, AI cloud computing, and 5G data centers. 

The global GPU market was worth an estimated $19.8 billion in 2019 but will balloon to $200 billion by 2027. With NVIDIA already tapping into key markets and leading its rival in the GPU space, the tech giant is well-positioned to continue growing. 

The verdict: Buy NVIDIA 

While Qualcomm certainly has some potential to be a good investment, NVIDIA’s diversification of its GPU business across data centers, gaming, and future tech (think driverless cars) makes the company a better long-term bet. On top of that, NVIDIA’s core businesses are performing well and providing stability for the company as it pursues new revenue opportunities. All of this gives NVIDIA an edge over Qualcomm in this match-up.

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

More reading

• 3 reasons to sell a share

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple, NVIDIA, and Qualcomm. The Motley Fool Australia has recommended Apple and NVIDIA. 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.

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There are some ASX payment shares that are growing rapidly which could be worth a look.

Some businesses are driving the evolution for making payments and transfers in an electronic form rather than cash. 

These are two of them:

EML Payments Ltd (ASX: EML)

EML Payments has a number of different payment services for clients to use. The company has general purpose reloadable offerings such as gaming payouts with white label gaming cards, salary packaging cards, commission payouts and rewards programs. EML Payments also offers physical gift cards, shopping centre gift cards and digital gift cards. Finally, the company offers virtual account numbers.

The ASX payment share was one of the companies that was significantly sold off during last year, dropping from $5.66 to $1.33. It has since recovered to around $4 as somewhat normal living and EML’s financial performance returned.

In the first quarter of FY21 EML’s total revenue grew 20%, compared to the fourth quarter of FY20, to $40.6 million. The amount of earnings before interest, tax, depreciation and amortisation (EBITDA) generated by the ASX payment share in the FY21 first quarter was $10 million, which was 69% higher than the fourth quarter of FY20.

Dominic Rose from Montgomery Lucent Investment Management said at the start of December that the company was bouncing back well from COVID-19 impacts. He said: “the recent encouraging vaccine news materially increases confidence in a solid earnings recovery in FY22. Market estimates are for earnings before interest, tax, depreciation and amortisation to rebound 40 per cent in FY22 to $74 million, still well below pre-COVID expectations of $95-100 million.

“Looking back, one positive arising from the pandemic was EML’s ability to reprice and restructure the Prepaid Financial Services (PFS) deal in late March, allowing the company to retain a strong balance sheet ($118 million net cash as at the end of June) which offers optionality for further acquisitions. Valuation remains attractive for the growth potential of the business, in our view, with the stock trading on 12x recovered EBITDA (FY23 EBITDA $93 million).”

According to CommSec, the EML share price is valued at 38x FY23’s estimated earnings.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an electronic donation ASX payment share. It assists large and medium US churches to receive payments from donators.

The company has big goals – it is aiming for a 50% market share of the sector, which could translate into US$1 billion of annual revenue with all of the processing volume that could be done at that time.

Pushpay continues to boast of operating leverage and it’s expecting more to come over the rest of FY21 after revealing that its FY21 EBITDAF (EBITDA and foreign currency) was expected to be higher, in a range of US$56 million to US$60 million.

The technology company recently announced that it had allocated an initial investment of resources into developing and enhancing the customer proposition for the Catholic segment of the US faith sector. Management said that this represented a significant milestone as Pushpay continues to execute on its strategy to become the preferred provider of mission critical software to the US faith sector.

Fund manager Ben Griffiths from Eley Griffiths said: “Over the last 12 months it has become clear Pushpay is at an inflection point for both cashflow and earnings. Under the stewardship of CEO Bruce Gordon, Pushpay has transitioned from a founder-led investment phase into an optimize/monetization phase. What is more surprising is the very conservative nature of the accounts (a rarity in small cap tech, outside Iress Ltd (ASX: IRE)). We believe the next few years for Pushpay will be rewarding and that COVID-19 will accelerate the already entrenched trend to digital giving/engagement from cash.”

According to Commsec, the Pushpay share price is valued at 20x FY23’s estimated earnings.

More reading

• 3 explosive ASX growth shares that could be strong buys
• 3 exciting ASX tech shares to buy
• Got cash to invest? Here are 3 ASX shares to buy
• 3 extraordinary ASX shares to buy right now
• 3 compelling ASX growth shares to buy

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends EML Payments. The Motley Fool Australia owns shares of and has recommended EML Payments 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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