The TPG Telecom Ltd (ASX: TPM) share price has been an amazing outperformer in 2020 so far. Since the start of the year, the broader S&P/ASX 200 Index (ASX: XJO) has lost 13.89% of its value. In contrast, the TPG share price has rallied 26.68%, based on today’s closing price of $8.50.

This means TPG has outperformed the ASX 200 by over 40%. Not bad!

But investors who may have been watching this extraordinary rally might be wondering if there’s still time to buy in.

Why TPG shares have been rocketing higher in 2020

The TPG share price has been benefitting from a number of key events that have gone its way in recent months. Firstly (and most importantly), the proposed merger of TPG and Vodafone Hutchison Australia has been approved by the Federal Court. This comes following attempts by the ACCC to block the merger last year.

Assuming all goes well and the merger proceeds, this will result in a special dividend being paid to TPG shareholders. The dividend has been estimated at up to 67 cents per share (which would be worth a yield of nearly 8%). The merger will also result in TPG finally securing the ticker symbol ‘TPG’, which is a win for simplicity, if nothing else.

Furthermore, TPG has told investors it plans to spin-off its Singaporean business into a separate company named Tuas Limited. All existing TPG shareholders will then receive shares in Tuas if this spin-off is executed. I believe this move is a positive for the TPG share price, as spin-offs generally deliver benefits for existing investors. We saw this play out with Wesfarmers Ltd (ASX: WES) and its spin-off of Coles Group Ltd (ASX: COL) in 2018.

All of these factors are building a very positive picture for investors and are behind the surge in the TPG share price this year.

Is the TPG share price a buy today?

With all of these changes ahead, it’s hard to know exactly what TPG shares are currently worth. After all, this company is set to be altered dramatically when its merger goes ahead. Furthermore, existing TPG shareholders will only own 49.9% of the new entity.

Still, let’s have a look at what the TPG share price is telling us today. So on current prices, TPG shares are offering a dividend yield of 0.59% on a price-to-earnings (P/E) ratio of 29.16.

This doesn’t really indicate good value from my perspective. TPG’s main competitor Telstra Corporation Ltd (ASX: TLS), by contrast, is trading on a P/E ratio of 18.69 and a dividend yield of 3.09%.

As such, I would much rather bet on Telstra shares today than TPG, given Telstra offers better value on current prices and a far heavier investment in 5G technology.

More reading

• 3 ASX dividend shares with yields over 10%
• How does the economy affect the ASX 200 share market?
• Is the Fortescue share price under threat from a potential multi-million dollar earnings hit?
• Are Coles shares a buy after falling 12% in 2 months?
• Brokers name 3 ASX 200 shares to buy right now

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers 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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Finding ASX dividend shares with yields over 10% can be a dangerous game. A yield over 10% normally indicates that the market views the yield as risky, and primed for a possible dividend cut. Otherwise, it’s likely that the share price would be bid up until the yield is lower.

So let’s take a look at these 3 ASX dividend shares with trailing yields over 10% to see if we can find a diamond in the rough.

BetaShares Australian Dividend Harvester Fund (ASX: HVST)

This exchange-traded fund (ETF) employs a ‘dividend harvesting’ strategy. This means it buys ASX dividend-paying shares just before they’re about to go ‘ex-dividend’, after which the fund sells them again. In this way, it rotates in and out of most of the dividend heavyweights on the S&P/ASX 200 Index (ASX: XJO).

On one level, this strategy works to produce formidable dividend income. HVST currently has a trailing yield of 12%, or 16.8% grossed-up with franking.

Sounds pretty good, right?

Well, the downside is that this strategy trades capital value for income. There’s usually no free lunch when it comes to investing. And swapping in and out of dividend shares is no exception. Since its inception in October 2014, the fund has actually gone backwards, delivering a return of (1.17%). As such, I’m not too wild on this investment.

WAM Research Limited (ASX: WAX)

This listed investment company (LIC) specialises in buying undervalued ASX growth companies and selling them after a pricing ‘catalyst’ comes to pass. It has managed to do this quite successfully, netting investors a 13.4% return per annum on average since 2010.

WAM Research pays most of its profits out as dividends, which have been rising every year since 2010 as well. On current prices, this dividend equates to a yield of 7.01%, or 10.01% grossed-up.

LICs normally pay dividends out of a profit reserve, so let’s take a look at WAX’s tank to see how well-funded this dividend is. As of 30 April, WAM Research has 26.2 cents per share in profits against its most recent dividend of 4.9 cents per share. As such, I think this is a rare diamond of an investment which can sustain a grossed-up yield over 10%.

Alumina Limited (ASX: AWC)

Alumina is Australia’s largest aluminium pure play and has amassed a reputation as a generous dividend payer over the last few years.

On current prices, Alumina is offering a trailing yield of 7.74% – which grosses-up to 11.06% with full franking.

Unfortunately, I think Alumina’s dividend yield is unsustainable. Aluminium prices have fallen substantially in 2020, which will crimp the ability of this company to keep shovelling cash out the door. This is probably the reason Alumina shares have collapsed in 2020 so far, falling from $2.30 at the start of the year to today’s closing price of $1.51.

I have to agree with the market sentiment on this one that Alumina’s dividend isn’t sustainable going forward.

More reading

• How does the economy affect the ASX 200 share market?
• Is the Fortescue share price under threat from a potential multi-million dollar earnings hit?
• Brokers name 3 ASX 200 shares to buy right now
• Ready to invest your first $1,000? Try these 2 ASX shares
• 3 cheap ASX 200 shares I’d buy today

Motley Fool contributor Sebastian Bowen owns shares of WAM Research Limited. 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 PayGroup Ltd (ASX: PYG) share price had an impressive run on the ASX today, closing 12.10% higher after being up by as much as 19.35% throughout the day.

Based on today’s closing price of 69.5 cents, PayGroup’s market capitalisation stands at only $48 million. So it’s important to note that we’re very much at the smaller end of the ASX spectrum here.

PayGroup is a specialist human capital management software and services provider, tasked with performing payroll, pay to bill, human resources, and treasury services on behalf of clients. It has 2 businesses, PayAsia and Astute, the latter of which was acquired in late 2019.

The company operates primarily in the Asia Pacific region for multinational companies and has 875 clients throughout 33 countries.

Why did the PayGroup share price race higher today?

Well, this afternoon, PayGroup released its preliminary final report for the year ended 31 March 2020.

The company delivered FY20 annual recurring revenue of $17.8 million, exceeding guidance of $17.5 million. Meanwhile, revenue came in at $10.9 million, up 110% on the prior corresponding period, including a $2.9 million contribution from Astute.

Astute provides workforce management solutions, automating placement through to payroll and invoicing. The acquisition was completed on 1 November 2019 and its 5-month contribution to FY20 results have reportedly exceeded forecasts. During this period, Astute has been profitable and cash flow positive.

Overall, PayGroup reported growth across all segments in FY20, including 26.5% growth in PayAsia payslips. This was supported by strong sales momentum and new contract wins from the fourth quarter of FY19 and throughout FY20.

Additionally, PayGroup launched its Treasury Services offering in the second quarter of FY20. Live treasury transactions processed increased from 155 per month at the end of 1H20 to 3,653 per month at the end of 2H20. Given strong initial customer demand in the first year of its launch, PayGroup expects this offering to make a growing financial contribution in FY21.

The company’s new contract wins in FY20 amounted to $5.5 million, representing an increase of 12% on FY19. Meanwhile, new contract wins in FY21 to date (being 1 April 2020 to 25 May 2020) total $2.7 million.

Looking to cash flow, the company saw an improvement in its operating cash flow from negative $4.8 million in FY19 to negative $0.1 million in the current period. Cash flow momentum was particularly strong in the second half of FY20 on the back of continued new sales uplift and the Astute acquisition.

The company’s cash balance as at 31 March 2020 stood at $2 million, supported by a $3 million capital raising in November 2019.

COVID-19 update and outlook

As previously announced last month, PayGroup’s business has been able to adapt to a remote working environment with limited impact.

The company notes that COVID-19 stimulus packages have added to payroll complexity, which increases opportunities for both its Astute and PayAsia businesses. Against this backdrop, its sales pipeline continues to strengthen.

PayGroup expects to continue to deliver improved operating cash flows and the pathway to positive statutory earnings in FY21, driven by cost efficiencies, continued sales momentum and the positive contribution from Astute.

Commenting on the full-year results, managing director and CEO Mark Samlal said:

“We are only 2-months into our FY21 year and we expect that our businesses will continue to perform well, even if various lock down provisions continue to exist globally. In Australia we see that businesses are hiring, particularly contractors, which will positively improve Astute’s metrics. Our key markets in Asia are very resilient with many countries back to work.”

“We enter FY2021 in a good position, with a strong book of recurring revenue, 95% client retention, a cost efficiency plan and strong industry fundamentals in spite of the current COVID-19 headwinds,” he added.

More reading

• 3 ASX dividend shares with yields over 10%
• Fund managers have been buying these ASX 200 shares
• Insiders have been buying these ASX shares this week
• How does the economy affect the ASX 200 share market?
• Why this ASX 200 share is up 8% and poised for more explosive growth

Motley Fool contributor Cathryn Goh 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.

The post Why the PayGroup share price surged 19% higher today appeared first on Motley Fool Australia.

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I think it is well worth keeping a close eye on what substantial shareholders are doing.

Substantial shareholders are shareholders that hold 5% or more of a company’s shares. These tend to be large investors, asset managers, and investment funds. These shareholders are obliged to update the market when they make meaningful changes to their holdings.

I feel investors should look to use these notices to their advantage. After all, they give investors an idea of where the smart money is going.

Two notices that have caught my eye are summarised below:

ARB Corporation Limited (ASX: ARB)

According to a change of interests of substantial holder notice, Bennelong Australian Equity Partners has been topping up its position in this four-wheel drive vehicle accessories company. The notice reveals that Bennelong has bought 1,052,952 shares on-market over the last couple of months.

The fund manager clearly took advantage of its share price weakness during the market crash (to good effect) and was able to buy as low as $13.26. The company’s shares are now trading above $17.00. These purchases took Bennelong’s holding to a total of 6,821,451 shares, which equates to an 8.55% stake.

Charter Hall Group (ASX: CHC)

A change of interests of substantial holder notice reveals that Commonwealth Bank of Australia (ASX: CBA) has increased its stake in this property company. According to the notice, the banking giant has lifted its holding in Charter Hall by ~4.7 million shares to a total of 37,363,414 shares. This means the bank now has an 8% interest in the company.

It appears as though Commonwealth Bank believes that Charter Hall’s shares have been oversold during the market crash. Even after a strong recovery over the last couple of months, the property developer’s shares are still down by almost a third from their 52-week high.

More reading

• 2 high yield ASX dividend shares to buy right now
• ASX 200 rises again, ASX banks push higher
• Are ASX bank shares finally back in the buy zone?
• ASX 200 up 2.4%: Blackmores raises $92m, big four banks jump, Nearmap rockets
• ASX 200 edges down, bank share prices fly

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ARB 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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Once a week I like to take a look to see which shares have experienced meaningful insider buying.

This is because insider buying is often regarded as a bullish indicator, as few people know a company and its intrinsic value better than its own directors.

A number of shares have reported meaningful insider buying this week. Here are a couple which have caught my eye:

Dicker Data Ltd (ASX: DDR)

According to a change of director’s interest notice, this distributor of computer software and hardware has experienced more insider buying this month. The company’s Chief Operating Officer and Executive Director, Vladimir Mitnovetski, has added to his considerable holding. Mr Mitnovetski picked up 5,000 shares through an on-market trade on May 27. The director paid an average of $7.40 per share, which equates to a total consideration of $37,000.

Mr Mitnovetski has made several purchases over the last 12 months and now owns a total of 831,961 Dicker Data shares.This has proven to be an astute move.  The company’s shares have rallied over 50% higher since this time last year. And judging by his latest purchase of shares, this director sees further gains ahead.

TechnologyOne Ltd (ASX: TNE)

The directors of this enterprise software company have been busy buying and selling its shares this month. Masterbah Pty Ltd, of which Non-Executive Director John Mactaggart and Chairman Adrian Di Marco have a beneficial interest in, offloaded 4 million shares for a total of $36.8 million through an on-market trade on May 26. Fellow Non-Executive Director Ronald McLean sold 41,263 shares for $394,450.06 the same day through an on-market trade.

However, one director was still buying. The following day Peter Ball picked up 5,000 shares for a total of $47,715.36. This director appears to believe TechnologyOne’s shares are in the buy zone following a pullback after the release of its full year results.

More reading

• Build wealth for life with these 2 ASX 200 shares
• 3 top ASX dividend shares to buy in June
• ASX 200 up 1.7%: Flight Centre and Webjet rocket, Afterpay hits record high
• Why Leigh Creek, Lynas, Monadelphous, & TechnologyOne are dropping lower
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data 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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How connected are the S&P/ASX 200 Index (ASX: XJO) and the broader ASX share market to the Australian economy as a whole?

If the ASX 200 is having a good year, it’s often cited as a barometer of the economy as a whole. And if there’s an economic recession on the horizon, you’ll usually find the share market isn’t doing so well.

So case closed, right?

Well, not quite.

See, the economy is just another name for the commercial network that connects every consumer and business within our society. The government forms a major part of the economy, as does overseas investment.

In contrast, the share market represents the value of every public company in the country. Nothing more, nothing less.

And the health of the economy is only one factor that influences how much investors are willing to pay for each company (represented by each company’s share price).

Mixed messages

Just take last year. In 2019, the ASX 200 had one of its best years in recent times, banking a 20.8% gain over the year. That was in stark contrast to the broader economy, the growth of which was so slow it prompted the Reserve Bank of Australia (RBA) to cut interest rates 3 times in 2019.

These interest rate cuts were a large driving force behind the share market gains. Lower interest rates lead to higher values being placed in riskier assets like shares. This in itself proves that the ASX 200 doesn’t always move in tandem with the economy.

Another point to note is that the share market is a forward-looking mechanism. This means it is always trying to price in the most likely future scenario of economic growth. As such, the share market is not necessarily a reflection of where an economy is at the present.

This is why we’ve seen a massive rally in the ASX 200 since mid-March. And this growth hasn’t corresponded to our economy improving over the same period. Rather, it’s the signs that the economy is likely to improve over the rest of 2020 that is causing the ASX 200 to surge.

The same thing occurred back in 2009 when the world was just starting to recover from the global financial crisis. The ASX 200 had one of its best years ever in 2009 – rising over 30%. In contrast, it took a few more years for the economy to bounce back fully.

Foolish takeaway

The share market is heavily influenced by the economy, but not in ways that are always obvious or easy to predict. It’s probably better to think of the ASX 200 as being shaped by what investors think the economy of tomorrow is going to look like. Of course this sentiment should also be considered in combination with other macro-factors like interest rates, unemployment and geopolitical tensions on the world stage.

All in all, I believe success with investing depends on finding long-term, winning companies. This means investing in companies that have the ability to weather the economy’s ups and downs rather than trying to predict what the ASX 200 will do over the short term.

More reading

• Is the Fortescue share price under threat from a potential multi-million dollar earnings hit?
• Brokers name 3 ASX 200 shares to buy right now
• Ready to invest your first $1,000? Try these 2 ASX shares
• 3 cheap ASX 200 shares I’d buy today
• ASX 200 down 1.2%: Westpac tumbles, Appen reaffirms guidance, Costa CEO to retire

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Austal Limited (ASX: ASB) share price is up 8.91% at the time of writing after updating its full year guidance today. The company reported that full year revenue would likely increase by $100 million to $2 billion. Accordingly, earnings before interest and taxes would increase by $15 million.

This, along with many other positive announcements, sets the company up for an explosive growth spurt.

An undervalued gem

The Austal share price plummeted earlier in the month after news that it had lost a major contract to a lower priced competitor. But I think the market has oversold this company significantly, creating a fantastic buying opportunity. 

In fact, on the same day that Austal announced its lost contract, it also announced an additional $324 million contract for the Royal Australian Navy. 

Its location is also noteworthy. Recently, I visited the US town where Austal’s US production facilities are located – Mobile, Alabama. It is hard to overstate the impact of the company there. The town of Mobile runs on the Austal operations. Aside from strategic and tactical military goals, US defence spending is designed to create jobs. In my opinion, there is no way Austal could have won any US defence work from an Australian manufacturing location – it just wouldn’t happen.

Why Austal shares are ready for explosive growth

Austal revealed an order book worth $4.3 billion in its FY20 H1 report. It has also announced considerable contract wins since that time. Over the past 5 years, the Austal share price has grown by about 12% per year on average. Its current price-to-earnings ratio is 14.9 (at the time of writing), and over the past 9 years its average P/E has been closer to 17.

This company is right in my sweet spot as an investor in manufacturing companies. It has already spent the money to build the infrastructure, has impressive relationships, and is built on a track record of honesty and quality products. I think Austal shares are likely to see explosive growth over the next 1–2 months. 

More reading

• Why Afterpay, Austal, Kogan, & Northern Star shares are charging higher
• ASX 200 down 1.2%: Westpac tumbles, Appen reaffirms guidance, Costa CEO to retire
• The best performing ASX 200 stock today may have more room to climb
• ASX 200 Weekly Wrap: ASX rallies on mining highs
• 5 ASX 200 winners and 4 losers of last week

Daryl Mather owns shares of Austal Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. 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 Volpara Health Technologies Ltd (ASX: VHT) share price is edging higher today after reporting its full-year results for the year ended 31 March 2020.

Volpara is a New Zealand-based, small-cap ASX share that develops and sells software solutions. It facilitates the early detection of breast cancer by improving the quality of mammogram-based screening programs. 

What did Volpara announce?

For the 12 months to 31 March 2020, the company reported total revenue of NZ$12.6 million, up 153% from NZ$5 million in FY19. Within this, growth in subscription revenue continued its upward trajectory, up 106% on the prior corresponding period to NZ$9.1 million.

Volpara expects growth in subscription revenue to continue in FY21 as it pivots MRS Systems – a provider of breast clinic management software acquired in mid-2019 – away from a capital sales model to an almost solely software-as-a-service (SaaS) model. Additionally, the full end-to-end platform will be available for sales.

Despite an improvement in gross margins, which was up from 83% in FY19 to 86%, the company recorded a net loss for the year before tax of NZ$22.3 million. This compares to a loss of NZ$11.8 million in the prior year.

This was primarily the result of an increase in operating costs due to organic growth and the additional costs incurred after the MRS acquisition. Operating costs increased 110% from NZ$17.1 million in FY19 to NZ$36 million in FY20.

Nonetheless, as revenue continues to grow faster than operating expenses, the company improved its net margin from -235% in FY19 to -176% in the current period.

Given the uncertainty on business activity resulting from COVID-19, the company has undertaken various cost-saving initiatives. Volpara expects these initiatives will yield reductions of between 10% and 15% on annualised operating costs.

Looking to cash flow, Volpara increased its cash receipts from customers during the year by 193% to NZ$16.3 million. Its cash balance as at 31 March 2020 stood at NZ$31.4 million, which has now expanded to NZ$69 million following a recent capital raising. Importantly, the company remains debt-free.

Outlook and management commentary

Looking forward, the company recognises the world has changed with COVID-19 but highlights the critical nature of breast screening. 

Volpara will focus on long-term SaaS contracts which appear resilient despite COVID-19. Most of its contract are 5-year annual rolling contracts, paid annually in advance. The company noted that cash collection continues to be strong, with no obvious signs of any significant churn risks.

Commenting on the full-year results, CEO Dr Ralph Highnam said:

“FY2020 was an excellent year for Volpara. We successfully conducted our first acquisition, medical software company MRS Systems in the United States, and built an installed software base covering over 27% of US women screened for breast cancer.”

“Despite the current Coronavirus pandemic, we ended the year with our strongest Q4 to date and Annual Recurring Revenue (ARR) of over NZ$18M. This has set up the strong accounting revenue numbers we’re presenting today, showing very significant growth year-on-year,” he added.

At the time of writing, the Volpara share price is trading 0.35% higher for the day after being up by nearly 4% in morning trade.

More reading

• Why didn’t Warren Buffett buy more shares in the recent bear market?
• 3 exciting small cap ASX healthcare shares to watch
• Top brokers name 3 ASX shares to buy next week
• 3 exciting small cap ASX shares that should be on your watchlist
• These small cap ASX shares could be stars of the future

Motley Fool contributor Cathryn Goh owns shares of VOLPARA FPO NZ. The Motley Fool Australia owns shares of and has recommended VOLPARA FPO NZ. 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 Nearmap Ltd (ASX: NEA) share price has been a strong performer over the last couple of months.

Since March 29, the aerial imagery technology and location data company’s shares have zoomed a remarkable 123% higher to $2.23.

Is it too late to buy Nearmap shares?

Despite Nearmap’s impressive gain over the last couple of months, it is worth noting that they are still trading almost 50% lower than their 52-week high of $4.29.

I believe this leaves the company’s shares trading at a very attractive level for a long term investment. Especially given its high quality software and the fragmented and lucrative market it operates in.

I’m not the only one that thinks that the Nearmap share price is in the buy zone. This morning analysts at Goldman Sachs retained their buy rating and lifted their price target on its shares to $2.55.

Why is Goldman Sachs bullish on Nearmap?

Goldman Sachs was pleased with Nearmap’s better than expected market update on Thursday and named three key reasons why its shares are a buy.

The first is its large and growing market. The broker notes that Nearmap estimates the market opportunity in its four countries of operation (Australia, New Zealand, United States, and Canada) to be worth $2.9 billion per year.

This means that the annualised contract value (ACV) that it expects to achieve in FY 2020 of $103 million to $107 million is just a ~3.6% share of its overall market. This gives it a significant runway for growth over the next decade.

Another reason it is positive on the company is the fragmented nature of the aerial imagery market. Goldman believes this gives providers such as Nearmap an opportunity “to scale across a broad range of industry segments (i.e. such as architecture, insurance, government, utilities, solar panel providers).”

A third reason is the company’s technology. The broker believes it is very competitive versus its domestic and global peers. It notes that its strengths include high quality image capture and market leading frequency of capture. It also notes that a substantial investment has been made to provide oblique and 3D imagery and artificial intelligence/machine learning driven analytical capability at scale.

Combined, the broker believes Nearmap is capable of growing its ACV by a compound annual growth rate of 18% between FY 2019 and FY 2022.

I think Goldman is spot on with its buy rating, but is potentially being a little conservative with its estimates. I expect the company to deliver on its target of at least 20% growth over the period.

Overall, I think Nearmap is a great buy and hold option along with the likes of Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX).

More reading

• Brokers name 3 ASX 200 shares to buy right now
• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises again, ASX banks push higher
• These ASX tech shares could take your portfolio to the next level
• Why ANZ, Blackmores, IDP Education, & Nearmap shares are racing higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. The Motley Fool Australia owns shares of Altium and Appen Ltd. 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 Fortescue Metals Group Limited (ASX: FMG) share price is showing little signs of stress even as the miner faces compensation claims that could cost it hundreds of millions.

But investors aren’t perturbed by the news that the High Court denied the company special leave to appeal a Federal Court ruling.

The Fortescue share price is a rare riser on the S&P/ASX 200 Index (Index:^AXJO). The stock inched up 0.5% to $13.59 during lunch time trade while the top 200 benchmark shed 0.9% of its value.

The performance of the other major miners was mixed. The BHP Group Ltd (ASX: BHP) share price slipped 0.3% to $35.05 while the Rio Tinto Limited (ASX: RIO) share price added 0.6% to $94.16 at the time of writing.

What the court ruling means

The High Court defeat means that the earlier ruling that found Fortescue had built the Solomon iron ore mining hub without the permission of traditional owners will stick.

The traditional owners are represented by the Yindjibarndi Aboriginal Corporation (YAC) and the YAC is now expected to launch a multi-million-dollar compensation claim against Fortescue, reported the Australian Financial Review.

Big compensation bill

The court gave YAC exclusive native title rights over 2,700 square kilometres of iron ore-rich land in Western Australia’s Pilbara region.

The AFR reported that some in the community believe the size of claim should be based on a percentage of Fortescue’s total revenue of about $70 billion over the past decade.

You can see how even a small percentage can work out to be a big number.

Why investors aren’t worried

However, investors may be brushing this new development aside as it’s too early to quantify the impact of YAC’s claim.

The process might also take years to resolve if it’s dragged through the court system again.

In any case, the market may have already factored in some level of compensation that Fortescue has to cough up. The miner was backing the breakaway Wirlu-murra Yindjibarndi Aboriginal Corporation.

Further, the miner has previously downplayed the significance of any payout and said that the case does not affect its mining tenure rights or current operations.

Foolish takeaway

The Fortescue share price outperformed right through the COVID-19 market meltdown as its earnings and generous dividend handouts are resilient to the deep recession.

Such defensive qualities are hard to find in the current environment. This explains why the stock jumped 28% since the start of the year when the ASX 200 fell 13%.

More reading

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• Ready to invest your first $1,000? Try these 2 ASX shares
• 3 cheap ASX 200 shares I’d buy today
• ASX 200 down 1.2%: Westpac tumbles, Appen reaffirms guidance, Costa CEO to retire
• Will the Wesfarmers share price climb higher in 2020?

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto 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.

The post Is the Fortescue share price under threat from a potential multi-million dollar earnings hit? appeared first on Motley Fool Australia.

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