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.

Few companies have experienced greater long-term success than Amazon.com Inc (NASDAQ: AMZN). It was a darling of the dot-com boom, but its shares briefly fell into the single digits after the tech bubble burst.

However, over time, Amazon orchestrated a recovery as it dramatically increased its merchandise selection and made an early move into cloud computing. These shifts helped to make Amazon one of the largest public companies in the world. Consequently, its market capitalisation has grown to about $1.6 trillion, and its current share price of about $3,200 per share is a far cry from its low point in the dot-com bust.

Indeed, this retail stock has a history of defying its naysayers. While it’s difficult to accurately predict the state of Amazon in 2030, its financials and continuing growth in cloud computing bode well for the company’s future.

Amazon’s financials

With the company firing on all cylinders, Amazon appears to remain a buy. The question is whether it can place itself in a better position 10 years from now?

Amazon trades at a forward price-to-earnings (P/E) ratio of about 60. Despite this multiple, Amazon stock is not that expensive, especially considering that analysts forecast 38% earnings growth this year and 40% in 2021. Still, multiples and growth rates tend to contract over time, so investors should expect these numbers to fall.

Also, contrary to what casual observers might assume, most of this growth does not come from its retail arm. Yes, retail made up more than $78 billion of the company’s $88.9 billion in sales in the previous quarter. However, the company retained less than $2.5 billion of that revenue as operating income. In contrast, the $10.8 billion in revenue Amazon Web Services brought in last quarter generated more than $3.35 billion in operating income.

Putting Amazon’s success into perspective

Much like retail’s profit picture indicates, Amazon investors should also not count on “retail dominance” from a business standpoint.

Yes, Amazon is probably the most successful retailer operating today. Nonetheless, the term “retail dominance” has a history of becoming laughably overblown. Walmart Inc (NYSE: WMT) appeared unstoppable when Amazon was just an upstart bookseller. Go back enough decades, and the market power of Sears stoked fear. I expect Amazon to continue growing for the foreseeable future, but given the influence of other retailers, it must remain vigilant to retain its competitive edge.

I would also anticipate AWS’s head start in the cloud to continue serving the company well. Pioneering the cloud was a visionary decision on the part of Jeff Bezos.

Nonetheless, like retail, the cloud is too large for one company to truly dominate. Microsoft Corporation (NASDAQ: MSFT) has emerged as its largest competitor. Also, Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG), IBM (NYSE: IBM), and many others are also building a significant position in the cloud infrastructure business. Additionally, the cloud has also left room for the likes of Twilio Inc (NYSE: TWLO), Snowflake Inc (NYSE: SNOW), and others to carve out niches.

Considering these successes, it is easy to understand why Grand View Research forecasts a 15% compound annual growth rate (CAGR) for the cloud industry through 2027. This bodes well for a stock like Amazon, even 10 years out. 

Amazon in 10 years

Amazon shows no signs it will lose its influence anytime soon. Moreover, even if growth rates slow over time, its AWS division leads an industry expected to maintain double-digit growth for at least the next seven years.

This also points to AWS becoming more important to the company than it is now. Retail has long remained a competitive, low-margin business. This probably means success in retail will only translate into so much success for Amazon stock. The cloud should also remain competitive. However, with double-digit growth predicted for that industry, AWS should see proportionately higher profits. 

These increased earnings point to likely growth in the stock for at least most of the next ten years. It will probably also mean more maturing for Amazon, which could lead to cash returns for stockholders. Amazon is the largest company to not pay a dividend. With $71 billion in cash and equivalents on its balance sheet, the company has the ability to offer a payout. Adding a dividend would open Amazon to income-oriented investors.

A 10-year time period is too long to make any firm predictions. Nonetheless, Amazon’s financials and business success indicate that it can prosper for a long time to come.

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

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Will Healy owns shares of IBM. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Microsoft, and Twilio. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Snowflake Inc and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Twilio. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Coca-Cola Amatil Ltd (ASX: CCL) share price could be undervalued according to one leading broker.

This morning analysts at Goldman Sachs reiterated their buy rating and increased their price target on the beverage company’s shares to $10.60.

Including dividends, this price target implies a potential return of just over 10% over the next 12 months.

Why is Goldman Sachs positive on Coca-Cola Amatil?

Goldman notes that, unlike many other Australian Consumer Staples stocks, Coca-Cola Amatil has been negatively impacted by COVID-19 due to its exposure to the on-the-go channels.

While this is disappointing, the broker believes the market is under-appreciating how quickly the company can recover once the crisis passes.

It commented: “CCL appears to have been less resilient to the pandemic in comparison to the other staples due to its significant exposure to the On-the-go channel. However, the current discount of -2.4x on the distressed FY20 earnings (-18.2% vs. FY19) is unwarranted in our opinion, especially given our expectations for earnings recovery hereafter.”

Goldman has been looking at other markets in which Coca-Cola operates and observes that volumes in countries which were more open as normal during the crisis, such as the United States, have fared well.

Whereas volumes in countries with significant mobility restrictions, such as Australia and New Zealand, have fallen.

The broker believes this data “suggests the return to normality should be more rapid for these regions once the mobility restrictions are removed.”

In addition to this, the broker notes that Coca-Cola Amatil has made significant cost savings, some of which will be permanent. It believes this could be a big boost to its earnings in the near term.

Goldman explained: “Overall, this implies that if CCL was to deliver on the A$120mn of permanent cost outs, our earnings offer significant upside risk.”

“We plan review our forecasts as border openings progress in Australia and once we have more guidance on the strategy to achieve this cost savings. We expect these details to be discussed during the investor day in November,” it added.

Should you invest?

While I would sooner buy Coles Group Ltd (ASX: COL) ahead of Coca-Cola Amatil for exposure to consumer staples, I think Goldman Sachs makes some great points.

Though, it might be worth waiting until its investor day event next month before making a move.

More reading

• Coca-Cola forced to reveal secret source of Mt Franklin water

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Credit Corp Group Limited (ASX: CCP) share price jumped 5.5% higher on Thursday to close at $19.11 per share. That’s still around half of its $37.99 per share 52-week high set in mid-February.

So, what’s going on with the Aussie debt collector’s shares and why could they rocket higher in 2021?

Why the Credit Corp share price is surging higher

Credit Corp is a leading consumer debt collector. The company makes its money by purchasing debt from financiers like the major banks or other lenders for a discounted price and chasing that debt.

One key feature of businesses like Credit Corp is they often have fixed agreements with particular financiers like banks or telcos. Those agreements frequently require the collector to purchase a particular percentage of the financier’s bad debts each period.

It’s certainly not everyone’s cup of tea, but Credit Corp currently has a market capitalisation of $1.3 billion and sits within the S&P/ASX 200 Index (ASX: XJO).

The Credit Corp share price was smashed in the March bear market as investors feared a recession would mean lower debt collectability and profitability.

There were no ASX announcements yesterday to move the Credit Corp share price. However, the Federal Budget announced on Tuesday may have some important implications for Credit Corp’s business.

Strong fiscal spending is the key as the Federal Government looks to go hard and go early to stimulate the economy. Significant tax cuts and wage subsidies are good news for a company looking to collect on its debts.

Why 2021 could be a good year for Credit Corp

A strong economy should certainly be good news for Credit Corp. It would mean less financial distress and more spare money available for debt collection.

If the economy hits a really bad recession, a lot of loans can go bad quite quickly. That means a debt collector like Credit Corp could be overwhelmed with bad loans that it can’t make a good return on.

That’s why I think 2021 could hold good things for the Credit Corp share price.

Government stimulus and favourable business policies could boost employment and keep loan quality intact. That could mean steady portfolio growth with a higher chance of collection.

Foolish takeaway

The Credit Corp share price has been smashed this year. However, I think the favourable Federal Budget and recent stock momentum is good news for the company moving forward.

More reading

• 3 cheap ASX shares in the buy zone today
• Why Beach, BrainChip, Cleanaway, & Credit Corp shares are sinking lower

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Newcrest Mining Limited (ASX: NCM) share price will be one to watch this morning after the release of an update by the gold mining giant.

What did Newcrest announce?

This morning Newcrest announced that its board has approved two projects moving to the execution phase. These are Stage 2 of the Cadia Expansion Project and the Lihir Front End Recovery Project.

Newcrest’s Managing Director and Chief Executive Officer, Sandeep Biswas, believes these projects will add a lot of value.

He commented: “It is an exciting time at Newcrest as we advance our growth pipeline with both of these projects adding value to our existing large scale, long life operations while we pursue the development of Red Chris and Havieron and exploration opportunities globally.”

What will the projects add?

The Stage 2 Cadia Expansion Project will increase its plant capacity from 33mtpa to 35mtpa. This will lead to an increase in gold and copper recoveries, an increase in production, and a reduction in unit costs.

Life of Mine gold recoveries are forecast to increase by 3.5%, with Life of Mine copper recoveries increasing by 2.7%. Cadia’s all-in sustaining cost (AISC) will reduce by an estimated $22 per ounce.

The estimated capital cost for Stage 2 is $175 million, with completion expected in late FY 2022.

Mr Biswas explained: “Cadia is one of the largest, lowest cost, long life gold mines in the world due to the application of Newcrest’s industry leading block caving technology, and this investment helps Cadia maintain this industry leading position.”

Newcrest expects the Lihir Front End Recovery Project to deliver additional production through an improvement in gold recoveries over the life of the mine.

The chief executive believes that “Lihir’s long reserve life makes this improvement in gold recoveries particularly valuable” to its shareholders.

Overall, Mr Biswas appears confident on the company’s outlook and believes it is well-positioned for growth.

He concluded: “Both projects demonstrate how we are using innovation and our technical expertise to continually improve our operations. With a strong balance sheet, low cost production, a range of organic growth options and a strong exploration portfolio, Newcrest is well positioned for the future.”

More reading

• Top ASX growth shares to buy in October 2020
• ASX 200 up 0.4%: Big four banks push higher, Westpac upgraded, ARB impresses
• Why BHP, Estia Health, Newcrest, & Starpharma shares are dropping lower
• Will the Newcrest (ASX:NCM) share price fall after the Saracen merger?
• 5 things to watch on the ASX 200 on Tuesday

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re looking to make an investment in the Australian share market, then I think CSL Limited (ASX: CSL) shares would be a great option.

Three key reasons that I rate the company highly are listed below:

Australia’s highest quality business?

The first reason to consider buying CSL is its quality. In fact, I would argue that the biotherapeutics giant is Australia’s highest quality business. It is made up of two businesses – CSL Behring and Seqirus. CSL Behring is a global biotechnology leader which offers the broadest range of quality plasma-derived and recombinant therapies in the industry. Whereas Seqirus is one of the world’s leading vaccines developers with a focus on influenza. It is also supporting the efforts to develop and manufacture a COVID-19 vaccine. Combined, I believe these two businesses have positioned CSL perfectly for growth over the long term.

Attractive valuation.

Although the CSL share price has recovered from its lows, it is still trading some distance from its 52-week high. I think this has left its shares trading at an attractive level for a long-term focused investor. And while the pandemic is having a negative impact on its plasma collections, which are a key ingredient to its immunoglobulin products, I’m optimistic that this will be partly offset by increased demand for seasonal flu vaccines because of the pandemic. This could make now an opportune time to pick up shares.

Research and development pipeline.

Did you know that every year CSL invests approximately 10% to 11% of its sales into research and development (R&D) activities? So, with sales revenue in FY 2020 hitting US$8,797 million, the company is now investing almost US$1 billion each year into its R&D. This high level of investment ensures that the company has some of the most talented scientists in the industry working for it. It also means that its R&D pipeline is filled to the brim with therapies and vaccines that have the potential to generate significant revenues in the future.

Foolish Takeaway.

The CSL share price has smashed the market over the last 10 years. Due to the three reasons listed above, I’m confident it will do the same again over the next decade.

In light of this, I would class CSL shares as a strong buy.

More reading

• ASX 200 rises 1% again, Zip (ASX:Z1P) soars 8%
• ASX 200 up 0.8%: Big four banks higher, CSL rises on vaccine update, Zip rockets
• CSL (ASX:CSL) share price higher on COVID-19 vaccine update
• 3 ASX shares to buy in a US election selloff
• Federal Budget: What it means for the CSL (ASX:CSL) share price

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 has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Have you looked at the interest rate you’re receiving on your savings recently? You might be surprised to learn that there is barely even a rate to speak of.

For example, the Commonwealth Bank of Australia (ASX: CBA) NetBank Saver account is offering a standard variable rate of just 0.05%. This is broadly in line with what the other big banks are offering.

This means that even if you had $1 million in one of these accounts, you would receive just $5,000 of interest each year.

If you’re an income investor, I’m sure you would agree that this is nowhere near sufficient to live from.

But don’t worry, because there are a number of quality ASX dividend shares on offer on the Australian share market to save the day. Two that I would buy for income are listed below:

Accent Group Ltd (ASX: AX1)

The first ASX dividend share to look at is Accent. It is a footwear-focused retailer which owns retail store brands such as HYPE DC and Platypus. Accent has continued its positive form in 2020 despite the pandemic. This is being driven by the popularity of its brands, its strong market position, and growing online business.

Pleasingly, I believe there’s still a lot more to come from Accent over the coming years. This is thanks to its strong online offering, expansion plans, and its focus on active and casual wear. Another positive is the tax cuts that have been promised with the Federal Budget. This will put money in consumers’ pockets and support the retail sector. 

In FY 2021, I’m expecting the company to pay a 9 cents per share fully franked dividend. Based on the current Accent share price, this equates to a 5.3% dividend yield.

Rural Funds Group (ASX: RFF)

Another ASX dividend share to consider buying is Rural Funds. It is an agriculture-focused property company which owns a portfolio of property assets which are leased to some high quality producers. One of the main attractions to the company for me is its lengthy tenancy agreements. At the end of FY 2020, Rural Funds had a weighted average lease expiry of ~11 years.

And given that the company has rental increases built into these leases, I believe it is perfectly positioned to deliver on its distribution growth target of 4% per annum over the long term. It has already committed to this in FY 2021 and plans to lift its distribution to 11.28 cents per share. Based on the latest Rural Funds share price, this equates to a 4.95% yield.

More reading

• Why ARB, Accent, Bigtincan, & Transurban shares are dropping lower today
• Buy these ASX dividend shares to smash low interest rates
• Where I’d invest $10,000 into ASX dividend shares
• 3 alternative ASX shares to buy for defensive income
• 3 strong and reliable ASX dividend shares for October

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia has recommended Accent Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Thursday the S&P/ASX 200 Index (ASX: XJO) was on form and charged notably higher once again. The benchmark index rose 1.1% to 6,102 points.

Will the market be able to build on this on Friday? Here are five things to watch:

ASX 200 expected to rise again.

The ASX 200 index could end a spectacular week with another gain on Friday. According to the latest SPI futures, the benchmark index is expected to rise 14 points or 0.25% at the open. This follows another positive night of trade on Wall Street. In late trade the Dow Jones is up 0.4%, the S&P 500 is 0.8% higher, and the Nasdaq has risen 0.5%. The Dow Jones is now trading at its highest level in over a month.

Oil prices storm higher.

It could be a good day for energy shares such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) after oil prices stormed higher overnight. According to Bloomberg, the WTI crude oil price is up 3.2% to US$41.23 a barrel and the Brent crude oil price is up 3.35% to US$43.48 a barrel. Disruption from a storm in the Gulf of Mexico and strikes in Norway have hit supply and sent prices charging higher.

Gold price pushes higher.

Gold miners Newcrest Mining Limited (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) will be on watch today after the gold price pushed higher. According to CNBC, the spot gold price has climbed 0.35% to US$1,897.50 an ounce. Traders were buying gold amid election uncertainty.

Domino’s on watch.

The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price will be on watch today after its U.S. parent sank lower overnight following the release of its latest quarterly update. However, while the US pizza giant’s earnings fell short of the market’s expectations, it did surprise to the upside with its international operations. Domino’s Pizza Inc reported International same store sales of 6.2%, compared to consensus estimates of 1.9%. This could be good news for the locally listed Domino’s.

Platinum update.

The Platinum Asset Management Ltd (ASX: PTM) share price could come under pressure today after the fund manager revealed further fund outflows during September. Platinum’s funds under management fell almost 1% since the end of August to $21,472 million. As a comparison, earlier this week rival Magellan Financial Group Ltd (ASX: MFG) revealed further strong fund inflows during the month of September.

More reading

• ASX 200 rises 1% again, Zip (ASX:Z1P) soars 8%
• Which ASX ETFs offer the most diversification?
• Brokers name 3 ASX shares to buy right now
• Look through short-term unpredictability for long-term ASX share price gains
• ASX 200 up 0.8%: Big four banks higher, CSL rises on vaccine update, Zip rockets

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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With the Australian share market on fire this week, it will come as no surprise to learn that a number of ASX shares have recorded strong gains.

Three which have climbed so much they have hit new highs, are listed below. Here’s why these ASX shares are scaling new heights right now:

Costa Group Holdings Ltd (ASX: CGC)

The Costa share price hit a 52-week high of $3.76 on Thursday. Investors have been buying the horticulture company’s shares this year after it returned to form in FY 2020. During the first half, Costa posted a 6.8% increase in revenue to $612.4 million and a 12% lift in net profit after tax to $45.8 million. This was driven by a very strong performance from its international business. In addition to this, improving trading conditions in the domestic market appears to indicate that the worst is now behind the company.

NEXTDC Ltd (ASX: NXT)

The NEXTDC share price continued its positive run and hit a record high of $12.93 yesterday. This latest gain means the data centre operator’s shares are now up a whopping 98% since the start of the year. Investors have been fighting to hold of NEXTDC’s shares following a very strong showing in FY 2020 and its ever-improving outlook. Thanks partly to the accelerating shift to the cloud because of the pandemic, NEXTDC delivered a 23% increase in EBITDA to $104.6 million in FY 2020. Similarly positive growth is expected in FY 2021 as demand for data centre capacity continues to increase.

Super Retail Group Ltd (ASX: SUL)

The Super Retail share price was on form and hit a 52-week high of $11.55 on Thursday. The catalyst for this appears to have been the Federal Budget. Super Retail and its numerous retail brands look well-positioned to benefit from the tax cuts which are putting extra funds in consumers’ pockets ahead of the key holiday season shopping period. In addition to this, the prospect of higher domestic travel in the short term should be a boost to some of its brands.

More reading

• Top ASX growth shares to buy in October 2020
• Why this Federal Budget is good for many ASX shares
• Why the Coles Group (ASX:COL) share price just got upgraded to “buy”
• The latest ASX small cap buy ideas from leading brokers
• Why Costa, Qantas, Santos, & Westpac shares are storming higher today

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and Super Retail Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why NEXTDC (ASX:NXT) and these ASX shares are hitting new highs appeared first on Motley Fool Australia.

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I believe that the best way to generate significant wealth is to buy quality ASX shares and hold them for the long term.

It is worth noting that some of the world’s richest people, such as legendary investor Warren Buffett, have used this investment strategy to build their fortunes and there is nothing to stop readers from following suit.

With that in mind, here are three ASX shares that I think would be quality buy and hold options:

Altium Limited (ASX: ALU)

The first option to consider buying and holding is Altium. It is a printed circuit board-focused design software company which I believe is well-positioned to be a market-beater over the long term. This is because the company’s award-winning platform is exposed to the rapidly growing artificial intelligence and Internet of Things (IoT) markets. In respect to the latter, according to a recent presentation, global technology spending on IoT is expected to reach US$1.2 trillion in 2022. As the majority of IoT devices have printed circuit boards inside them, Altium appears well-placed to benefit.

REA Group Limited (ASX: REA)

Another ASX share to consider buying and holding is REA Group. I think the owner and operator of the realestate.com.au website could be a great long-term option due to its dominant ANZ market position and growing international operations. In addition to this, cost cutting, price increases, and new revenue streams appear to have positioned the company perfectly for growth once the COVID-19 crisis eases.

SEEK Limited (ASX: SEK)

A final buy and hold option to consider is SEEK. The job listings giant has been investing heavily in future growth opportunities in recent years. Whilst this has been limiting its short term profit growth, I believe it has set up the company for strong long term growth. Combined with the job-focused Federal Budget and its rapidly growing China-based business, I believe SEEK’s outlook is looking very positive. Overall, I believe the SEEK share price could generate market-beating returns over the next decade and beyond.

More reading

• Why I think the Seek (ASX:SEK) share price is primed to surge in 2021
• Is the Altium (ASX:ALU) share price a strong buy?
• Which ASX share may benefit from the jobs-led recovery Budget?
• ASX 200 up 0.4%: Big four banks push higher, Westpac upgraded, ARB impresses
• Why a2 Milk, Afterpay, ARB, & SEEK shares are pushing higher today

James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia has recommended REA Group Limited and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Kelly Partners Group Holdings Ltd (ASX: KPG) share price had a mixed trading day today. After hitting a 52-week high of $1.45 in early trading, the Kelly Partner’s share price dropped back to close flat at $1.30. Let’s take a closer look.

Why is the Kelly Partners share price on the move?

Kelly Partners announced last month it was conducting an on-market share buyback. The chartered accounting network plans to buy back up to 45.3 million shares or 10% of its shares outstanding. 

The company reported it was experiencing continued growth. Senior management also recently purchased 344,417 shares from CEO Brett Kelly to align management interests with the company’s performance. The CEO maintains a holding of 50.01%.

According to Kelly Partners, the company has experienced revenue growth of 32% per year since its inception in 2006, and revenue growth of 15% per year since its initial public offering (IPO) in 2017. Dividend growth has been at 10% per year since its IPO.

Kelly Partners said it expected to reach revenue of $80 million per year by the 2024 financial year. The company also anticipates earnings before interest, tax, depreciation and amortisation (EBITDA) of $28 million per year by FY 2024. The company forecasts that it will double its net profit after tax and amortisation (NPATA) to $8 million per year by FY 2024.

About the Kelly Partners share price

Kelly Partners provides accounting services to small to medium-sized businesses and private clients. The company has offices in NSW, Victoria and Hong Kong.

In the year to 30 June 2020, Kelly Partners increased its net profit after tax to $4 million, up 64.8% compared to the prior year. The company had revenue of $46.4 million in the 2020 financial year, an increase of 16% compared to FY2019. The company’s underlying EBITDA in FY 2020 was $13.7 million, up 26.1% compared to the prior year.

In June, Kelly Partners acquired an accounting firm based in Bathurst, NSW. The acquisition was expected to deliver recurring revenue of $270,000 and add $130,000 to EBITDA. The acquired firm was set to move into Kelly Partners existing office in Bathurst. The company also announced that it was in acquisition discussions with several other firms.

The Kelly Partners share price is up 132.14% since its 52-week low of 56 cents, and has increased 30% since the beginning of the year. The Kelly Partners share price is up 34.02% since this time last year.

More reading

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Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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