The Marley Spoon AG (ASX: MMM) share price is on watch following the release of the company’s half-year results after the market close on Thursday. 

The company is a leading global subscription-based meal kit provider.

Half-year results

The coronavirus pandemic has accelerated the adoption of online grocery shopping and the growth of Marley Spoon’s business. As a result, it has upgraded its 2020 full-year guidance for revenue growth to be in the 80% to 100% range compared to the prior corresponding period (pcp). 

1H20 revenue grew 89% to 116.2 million euros compared to the pcp. Additionally, Marley Spoon’s contribution margin is at a record 30%, up 6 percentage points year-on-year (YoY). Slower increases in marketing, general and administrative expenses has led to increased earnings. 

Q2 revenue grew 129% to 73.3 million euros compared to the pcp.

Marley Spoon’s net loss was 67.5 million euros in the first half, primarily due to a non-cash fair market value adjustment on derivatives related to convertible bonds and warrants. 

Pleasingly, Marley Spoon turned cash flow positive in 1H20 to over 8 million euros. Its cash balance has increased by 13 million to 18 million euros. 

It delivered positive operating earnings before interest, taxation, depreciation and amortisation (EBITDA) in Q2, but an overall loss of 2 million euros in 1H20.

Favourable market

CEO Fabian Siegel said:

Since we last reported to the market at the end of July, the impact of the COVID-19 pandemic continues to create a favourable environment for us. We still see an accelerated adoption of online shopping for all kinds of goods, including groceries.

The company was preparing for a sizeable drop in quarter on quarter revenue for Q3, due to uncertain economic conditions, but this didn’t materialise. Marley Spoon is experiencing significantly reduced customer acquisition costs and strong demand in all regions. 

The temporary closure of its Melbourne facility due to infected team members did not materially impact the business or customers. It has since re-opened the Melbourne manufacturing site. 

Outlook

Marley Spoon continues to see strong momentum in customer acquisition and better than usual unit economics, driven by a high level of retention and significantly lower customer acquisition cost. The company intends to take advantage of this trend and invest in customer acquisition where targets are being met or exceeded.

The company will continue reinvesting profits back into business while improving its cash position and balance through lowering debt and increasing equity through conversion of convertible bonds. 

The Marley Spoon share price was trading at $3.40 per share at market close on Thursday night, down 2.86%.

More reading

• On a day when the ASX 200 is going nowhere, these popular “coronavirus shares” are hitting record highs
• If you invested $8,500 in this ASX share 6 months ago, you’d have $100,000 now
• Even after the meteoric rise in the Marley Spoon share price, here’s why it remains a core holding for one leading fund manager
• 3 ASX small cap shares with serious growth potential
• Can the Bubs share price go higher in 2020?

Motley Fool contributor Matthew Donald 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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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.

What happened

Shares of Facebook (NASDAQ: FB) jumped 8.2% to a new closing high of $303.91 on Wednesday, after analysts helped to focus investors’ attention on the digital ad titan’s massive growth opportunity in e-commerce. 

So what 

On Tuesday, UBS analyst Eric Sheridan reiterated his buy rating on Facebook’s stock and boosted his price forecast from $242 to $330. Even after today’s move, Sheridan’s new target price represents potential gains for investors of roughly 9%.

Sheridan believes Facebook’s recent push into e-commerce will be a significant source of additional growth for the social media leader. In May, Facebook partnered with Shopify and other e-commerce companies to launch Facebook Shops, a new online shopping platform. And yesterday, BigCommerce said it’s teaming up with Facebook to launch a new feature on Instagram that would allow users to purchase products without leaving the popular photo-sharing app. In turn, Sheridan expects Facebook to become a powerful force in social commerce.

Now what

Facebook is already benefiting from the rise of e-commerce, as many online retailers spend heavily to promote their wares on its social media networks. But Facebook is taking steps to make it easier to make purchases directly from its social media sites, and, in the process, claim a larger share of the online retail industry’s profits.

Judging by the stock’s recent gains, investors applaud Facebook’s e-commerce initiatives.

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

More reading

• Zoom Video to soon appear on Amazon, Facebook, and Google smart display devices
• Want to own the FAANG stocks? Here are 3 ways you can
• Warren Buffett would applaud the share price gains of these undervalued ASX shares
• Why Facebook’s share price is up…again
• Meet the ASX stocks that are about to get a boost from Facebook and Google

 Joe Tenebruso has no position in any of the stocks mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, 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 Facebook and Shopify. The Motley Fool Australia has recommended Facebook. 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 S&P/ASX 200 Index (ASX: XJO) rose by 0.16% today to 6,126 points.

It was another busy day of reporting today with plenty of good growth numbers.

Afterpay Ltd (ASX: APT)

Buy now, pay later (BNPL) business Afterpay released its FY20 result today.

Total underlying sales grew by 112% to $11.1 billion. Afterpay said it has an annual run rate of over $15 billion per annum, based on FY20 fourth quarter trading. Active customers increased by 116% to 9.9 million and active merchants went up 72% to 55,400.

The gross loss as a percentage of underlying sales improved from 1.1% last year to 0.9% in FY20 for the ASX 200 business.

Total income increased by 97% to $519.2 million. The net transaction margin grew by 110% to $250.2 million. The net transaction margin stayed steady at 2.3%.

Afterpay’s earnings before interest, tax, depreciation and amortisation (EBITDA) excluding significant items rose by 73% to $44.4 million.

During FY20, Afterpay added 17,300 new customers per day. In the last quarter of FY20 it added 20,500 new customers per day.

Pleasingly, customers continue to transact more frequently the longer they stay on the ASX 200 share’s platform. International markets are following a similar customer frequency trajectory like the ANZ business.

Afterpay launched into Canada in August to extend its North American business. It recently announced the acquisition of European-based Pagantis. It is also planning to expand into Asia after the acquisition of a small Singapore business operating in Indonesia called EmpatKali.

Bega Cheese Ltd (ASX: BGA)

The best performer in the ASX 200 today was Bega Cheese.

Bega management said that the FY20 result demonstrated the value of a consistent strategy and the capacity to manage unpredictability across the supply chain.

The statutory results were quite impressive with revenue growth of 5% to almost $1.5 billion. EBITDA grew by 11% to $87.8 million, EBIT went up 48% to $42 million and profit after tax (PAT) grew by 384% to $21.3 million.

However, when expenses relating to legal costs, IT systems and Koroit were excluded, the normalised result didn’t look as impressive.

The ASX 200 business said normalised EBITDA fell 2% to $103 million, normalised EBIT dropped 11% to $57.2 million and normalised PAT rose 3% to $31.9 million. Normalised earnings per share (EPS) was the same as last year at 14.9 cents.

The Bega board declared a final dividend of 5 cents per share.

In FY21 Bega said it’s well placed for growth and seasonal conditions in dairy are “much improved” compared to recent years with industry supply expected to increase in FY21.

Appen Ltd (ASX: APX)

The worst performer in the ASX 200 was Appen after releasing its FY20 half-year result. The Appen share price fell by 11% today.

Appen reported that total revenue rose by 16% to $306.2 million. Relevance revenue rose 34% to $273.9 million and speech and imagine revenue dropped 20% to $31.9 million.

Underlying EBITDA dropped 2% to $49.1 million. However, statutory EBITDA increased by 34% to $50.9 million.

Underlying net profit fell by 12% to $28.9 million and statutory net profit rose 8% to $22.3 million.

Appen said that revenue growth and customer acquisition in China has been “especially pleasing” as well as new customer wins in the first half in the US and Europe.

The ASX 200 tech share said that the pandemic has had a negligible impact on the first half result. A slowdown in new business development and deferred renewals by smaller customers amounted to low single digit percentage points of revenue. The global slowdown in online advertising spend brought about by the pandemic will have a small impact on Appen’s ad-related revenue in the second half.

The company said it’s expecting full year underlying EBITDA to be in the range of $125 million to $130 million. The full year underlying EBITDA margin is expected to be in the high teen percentage.

More reading

• Afterpay reckons this 1 number shows its ‘moat’
• Is the Afterpay share price heading to $200, or is this the ASX’s biggest bubble?
• What Prospa’s share price reaction and profit results mean for ASX banks
• Is it finally time for ASX investors to buy gold?
• Where to invest in a ‘rip-roaring’ share market rebound

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO 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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Domino’s Pizza Enterprises Ltd. (ASX: DMP) shares gained 3.2% in today’s trading, bringing the total gains for the Domino’s share price to 17% in August.

As one of Australia’s top 200 listed shares, Domino’s makes up part of the S&P/ASX 200 Index (ASX: XJO). In contrast, the ASX 200 has gained 3.8% so far in August.

Despite being well-positioned in the takeout and food delivery market, Domino’s shareholders weren’t spared the pain during the wider COVID-19 share market selloff earlier this year. The Domino’s share price tumbled 31% from 20 February through to 19 March.

Since then Domino’s shares have been on a tear, up 94% from the March low. Year-to-date, the Domino’s share price is up 61%, while the ASX 200 is still down 8%.

What does Domino’s do?

Australian-owned Domino’s Pizza Enterprises Limited is Domino’s largest franchisee outside of the United States. The business predominantly makes pizzas with a focus on takeout and delivery services.

The company holds franchise rights to the Domino’s brand in Australia, New Zealand, Belgium, France, The Netherlands, Japan, Germany, Luxembourg and Denmark, with more than 2,500 stores.

Domino’s shares began trading on the ASX in 2005.

Why is the Domino’s share price up 17% this month?

With the exception of this year’s viral selloff, the Domino’s share price has remained in a solid uptrend since July 2019.

It got a big boost following the release of its FY20 results on 19 August.

The company reported online sales growth of 21.4% and a 6.5% growth in the number of its franchisees. Same store sales growth came in at 5.8%, in line with the company’s guidance. It also announced a huge uptick in free cash flow, which grew 90.6% to $161.8 million.

Domino’s is well positioned with its takeout and delivery business model in these days of social distancing and rolling lockdowns. The company has also been quick to embrace new technologies, including AI-enabled voice assistants, app ordering and even drone delivery.

Domino’s potential to deliver share price growth was clear to the Motley Fool’s own Scott Phillips well before the coronavirus was forcing people to stay at home. Scott recommended Domino’s in his Share Advisor service on 26 April 2018. Members who followed Scott’s advice and held onto their shares have seen the Domino’s share price gain 101% since then.

More reading

• Top brokers name 3 ASX shares to sell next week
• WiseTech and 2 more ASX shares outperforming this earnings season
• Why I’d buy the Domino’s share price at an all-time high
• The latest ASX 200 stocks hit by broker downgrades
• ASX 200 rises 0.7%, CSL soars 6.4%

Motley Fool contributor Bernd Struben 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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The Experience Co Ltd (ASX: EXP) share price soared 15.38% higher today as the company announced better than expected full year results. Experience’s share price was trading at 15 cents at close of trade.

Experience provides adventure tourism and leisure activities in key tourist destinations in Australia and New Zealand. Some of these experiences include tandem skydiving, Great Barrier Reef snorkeling, helicopter and diving tours and hot air ballooning.

Experience’s FY 2020 challenges

The Experience share price has been battered this year as it suffered from the impacts of Australia’s bushfires and the COVID-19 pandemic.

CEO John O’Sullivan said 2020 had presented “the most challenging conditions” in the company’s 20-year history.

“The Australian tourism industry was already on the back foot from the Australian bushfires, however it was brought to an immediate halt upon the emergence of COVID-19,” he said.

So how did the company perform in FY 2020

Experience generated $87.4 million from continuing operations. This was a 32.8% decline on the previous year, largely driven by COVID-19 and the bushfires. Underlying EBITDA fell even more drastically to $7.3 million – a 70% decrease. This included a second half loss of $1.8 million with allowance of bad debts.

The company posted a loss of $39.7 million for the year, falling from a $5.4 million profit the year before. As international customers make up 65% of Australian and 92% of the company’s New Zealand operations, it is not hard to see the impact of coronavirus-related travel restrictions on business operations.

With tourism not expected to return to pre-pandemic levels until after FY24, net debt is an important consideration as companies struggle to pay off large debts. Experience share holders will be happy that its net debt of $9.0 million has declined as a result of divestment in non-core assets. This has delivered approximately $22 million.

The Experience share price rocketed today, with most of the bad news likely to be already priced in. Cost-saving programs and rapid response to the pandemic have also mitigated the impact of such extreme adverse conditions.

Outlook for the Experience share price

Heading into FY21, Experience enters the recovery phase. Trading conditions will depend on pandemic developments and restrictions on domestic and international borders. Profitability is understandably one of the company’s foremost concerns and as such it has implemented stringent cost-saving controls.

The Experience share price is on the rise as operations restart across the portfolio. Skydive locations have opened in all locations except for Victoria and Glenorchy (NZ). Furthermore, July trading has been encouraging, with underlying EBITDA breakeven for the first time since the return of operations. However, this is aided by the support provided by Jobkeeper and landlords.

More reading

• Marley Spoon share price on watch after upgrading revenue guidance
• Why Facebook stock surged to a new all-time high on Wednesday
• ASX 200 rises 0.2%, Afterpay reports FY20 result
• Domino’s share price gain of 17% in August a good slice of news for shareholders
• Tesla stock split: Should you buy now or wait?

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of EXPERNCECO FPO. 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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Shares of Tesla (NASDAQ: TSLA) will soon start trading on a split-adjusted basis, making the stock more accessible to investors who weren’t willing to shell out around $2,000 for a single share. On Monday, the electric-car maker’s shares will begin trading on a 5-for-1 basis. 

With a stock split just days away, many investors are likely interested in buying shares of the electric-car maker. More importantly, some investors may be wondering whether it makes more sense to buy the growth stock before or after Tesla stock starts trading on a split-adjusted basis.

Is the stock more likely to go up or down after shares split?

Stay focused on the business — not the upcoming stock split

Based on the way Tesla stock has traded since its stock split announcement earlier this month, investors may be tempted to think that buying the stock ahead of its split on Monday makes the most sense. After all, shares have already risen 35% since the stock split was announced on Aug. 11. 

But the reality is that it’s impossible to know how Tesla shares will trade leading up to (or after) the upcoming stock split. Sure, recent exuberance in the market for Tesla shares has likely been driven, in part, by excitement about the upcoming stock split. But there is no rational reason for investors to bet on a stock simply because of a stock split, as a stock split does nothing to make Tesla shares more valuable.

All that will happen in Tesla’s stock split is a fivefold increase in total share count. Each share, however, will represent one-fifth of the ownership in the electric-car maker that it did previously. Put another way, shareholders will have five times the shares in their account after the split but the total value of those shares will equal their combined pre-split value.

Don’t speculate

With all this in mind, investors should base any investment decision on their long-term expectations for Tesla’s underlying business and the stock’s current valuation relative to those views. Therefore, if you believe the stock is worth more than its $393 billion market capitalization at the time of this writing, consider buying the shares based on that belief. But don’t buy shares based on a speculative bet on how the stock will trade leading up to or following the stock split.

Of course, some investors may be convinced that there will be a bump in demand for Tesla shares when they become more affordable after their split. Keep in mind, however, that the market is forward-looking; if you’re predicting this will be the case, you’re likely not the only one thinking this. The Street may have already priced in an expected boost to demand by bidding up shares, and some investors may be standing by ready to sell if the stock becomes overvalued based on their estimate of its underlying business value.

It’s simply impossible to know how Tesla shares will trade in the coming days. If you are interested in buying Tesla stock, do so based on your long-term view for the automaker’s business potential.

Is Tesla stock a buy?

Nevertheless, investors are likely still wondering: Is Tesla stock a good buy at this level?

After soaring 900% over the past 12 months, the automaker’s valuation is becoming increasingly difficult to justify. Despite boasting a market capitalization that is closing in on $400 billion, the automaker’s trailing-12-month free cash flow is less than $1 billion. Furthermore, while Tesla’s vehicle deliveries are growing quickly and are likely to continue rising, the automaker is only expected to deliver 500,000 vehicles this year. Compare that to the approximately 2.5 million vehicles BMW sells annually, despite BMW’s market cap being less than $40 billion.

While Tesla’s execution recently has been impressive, from last year’s rapid factory construction launch in China to an earlier-than-expected Model Y launch this year, investors should consider the stock’s wild valuation carefully before buying shares.

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

More reading

• The 1 Warren Buffett quote that tells us how to invest right now
• Analyst says Tesla best-case scenario could see share price spike 70% to $3,500
• These beaten down ASX energy shares could mirror the tech share price boom
• Why Tesla Stock Soared Past $2,000 on Thursday
• Tesla Gigafactory 1 to boost battery production capacity 10% after new $100 million panasonic investment

Daniel Sparks 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 Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends BMW. 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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Afterpay Ltd (ASX: APT) showed off a statistic on Thursday it claims sets it apart from its rivals.

The buy now, pay later (BNPL) provider displayed the evidence in its results presentation, where it announced a 112% boost in sales to hit $11.1 billion.

The table shows Afterpay only receives 14% of its revenue from customer fees, compared to more than 60% for its BNPL rivals and 80% for credit cards.

Provider	Income from customer fees	Income from merchant fees
Afterpay	14%	86%
BNPL US competitor 1	67%	33%
BNPL US competitor 2	67%	33%
BNPL Australia competitor	63%	37%
Credit cards	80%	20%
Source: Afterpay. Table created by author.

Afterpay chief executive Anthony Eisen said this differentiates the service from both old world and new world competitors.

“We don’t need customers to lose for us to win,” he said.

“We don’t rely on customers to go into revolving debt to make money.”

Eisen said this has been the philosophy throughout the company’s 5-year existence.

“We don’t charge interest. We cap late fees. We still, as we have from day one, suspend accounts when a single payment is missed. The idea is you use Afterpay to own something – you don’t use it to rent something.”

The average order is worth $153, which Afterpay considers a low amount, and the average outstanding balance is just $190.

“We only let customers spend more if they demonstrate good behaviour.”

The moat keeps rivals and regulators away

Of course, it is in Afterpay’s interests to continue to push the line that it is not a credit provider.

The company is still co-operating with the Australian Securities and Investments Commission and AUSTRAC in their enquiries into the BNPL sector.

Its business model would be substantially impacted if authorities decided Afterpay and its rivals required the same level of regulation as traditional credit.

Eisen said its BNPL competitors largely had the same motivations as old credit card providers.

“When you look at traditional credit models, they make more money when consumers spend beyond their means or when they miss payments.”

Afterpay claims that on home loan applications, spending on its platform is counted as an expense. This is compared to a credit card, which results in a loss in borrowing power for the applicant.

Afterpay’s share price dipped Thursday morning after the release of its financial results. It has since recovered to be 0.85% up at 3.38 pm AEST, to trade at $91.49.

More reading

• Is the Afterpay share price heading to $200, or is this the ASX’s biggest bubble?
• What Prospa’s share price reaction and profit results mean for ASX banks
• Where to invest in a ‘rip-roaring’ share market rebound
• ASX 200 jumps 0.7%: Afterpay reaches 9.9 million customers, Woolworths strong sales growth
• Afterpay share price in focus after stellar FY 2020 result

Motley Fool contributor Tony Yoo owns shares of AFTERPAY T FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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 Wednesday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three ASX shares that have just been given sell ratings by brokers are listed below.

Here’s why these brokers are bearish on them:

Adbri Ltd (ASX: ABC)

According to a note out of the Macquarie equities desk, its analysts have retained their underperform rating but lifted the price target on this building products company’s shares to $2.20. Although Adbri delivered a better than expected half year result, the broker isn’t in a hurry to change its rating. It notes that the company is facing structural issues and a very competitive market environment. The Adbri share price finished the day at $2.41.

Blackmores Limited (ASX: BKL)

Analysts at Credit Suisse have retained their underperform rating and $65.00 price target on this health supplements company’s shares. According to the note, the broker has downgraded its earnings estimates to reflect the company’s weakening outlook. It also appears underwhelmed by its FY 2020 result and notes that costs are growing quicker than revenue. The Blackmores share price last traded at $65.80.

Lovisa Holdings Ltd (ASX: LOV)

A note out of Citi reveals that its analysts have retained their sell rating but lifted the price target on this jewellery retailer’s shares to $6.25. According to the note, the broker is concerned that Lovisa could be left behind by the shift to online shopping. This is because it traditionally relies heavily on foot traffic to drive its sales. It suspects that the company may have to increase its marketing spend to achieve the same level of sales per store in the future. The Lovisa share price ended the day at $7.35.

More reading

• Lovisa share price falls as fashion retailer reports sharp drop in profits
• ASX 200 rises, Bingo jumps after reporting
• Why Blackmores, MNF Group, Nanosonics, & Seven West Media are dropping lower
• ASX 200 up 0.7%: Big four banks storm higher, Blackmores disappoints, Xero acquisition
• Blackmores share price in focus after sharp profit decline in FY 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores 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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There aren’t too many ASX shares that offer an attractive mix of income and growth.

Some ASX shares are known for growth like Xero Limited (ASX: XRO). Others are known for income such as Telstra Corporation Ltd (ASX: TLS). But there aren’t many businesses offering a good mix of both.

Here are two ASX shares I’d buy that offer a mix of income and growth:

Citadel Group Ltd (ASX: CGL)

I think that Citadel is a very compelling ASX share with good growth potential.

The FY20 result was announced today. The statutory result was a little messy with a few ‘significant items’ which included costs relating to the Wellbeing acquisition. When looking at the underlying result, Citadel had a strong year with revenue growth of 29.4%, gross profit growth of 24% and earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 25.3%. I think these were solid numbers. 

FY21 is set up to be a strong year with a full year contribution from Wellbeing, a UK health software business. Not only is there at least $1.5 million of annualised cost savings from a synergy program, but there is a number of good cross-selling opportunities. Citadel says that the majority of health software has recurring revenue – around 77% – and it is at a high margin (approximately 79%).

I’m excited by the prospect of the company expanding in several different sectors such as construction, local government and health. The ASX share revealed that it has a “strong” merger and acquisition pipeline focused on scalable software opportunities that build on existing capabilities.

The Citadel board declared an annual dividend of 10.8 cents per share for FY20. At the current Citadel share price that equates to a grossed-up dividend yield of 3.4%. As profit grows the company will be able to grow its dividend whilst also investing for growth.

I think the Wellbeing acquisition is transformational for Citadel. The Citadel share price is currently trading at under 14x FY22’s estimated earnings. Compared to plenty of other ASX tech shares, I think this is attractive value.

WAM Global Limited (ASX: WGB)

WAM Global is a listed investment company (LIC) that is operated by the high-performing outfit, Wilson Asset Management.

The idea behind WAM Global is to bring the investment strategy that has worked well for WAM Capital Limited (ASX: WAM) to the global share market. So it’s aiming for undervalued global growth companies.

WAM Global sometimes goes for smaller businesses than some other globally-focused Australian fund managers may go for.

At 31 July 2020, some of its biggest holdings included: CME Group, Electronic Arts, Hello Fresh, Hasbro, Edwards and Dollar General. However, it also owns some larger businesses like Tencent, Microsoft and Lowe’s. These are high quality ideas. 

Over FY20, the WAM Global portfolio’s gross return was 3.1%, outperforming the MSCI World SMID Cap Index in AUD terms by 5%. Over the longer-term I expect WAM Global will be able to produce solid gross returns.

As a LIC, WAM Global can generate investment returns. It can then steadily pay out some of that profit as a smoothed dividend for shareholders.

The ASX share grew its FY20 final dividend by 100% to 4 cents per share, bringing the full year dividend to 7 cents per share. This is more than I was expecting, I was only thinking it would be 6 cents per share.

WAM Global had a profit reserve of 30.1 cents at 31 July 2020. This is 4.3 years of dividend coverage for shareholders.

At the current WAM Global share price it has a grossed-up dividend yield of 4.6% and it’s trading at a 6% discount to the net tangible assets (NTA) per share at 31 July 2020.

Foolish takeaway

I think both of these ASX shares offer an attractive combination of potential growth and income despite global COVID-19 impacts. I think WAM Global will be a pleasing ASX dividend share. Citadel has plenty of capital growth potential in my opinion. I think Citadel will produce the stronger total returns over the next five years, so it would be the one I’d pick with a decent starting dividend.

More reading

• Volatile day for the Citadel share price following FY 2020 results
• 3 small cap ASX growth shares to buy right now
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Citadel Group 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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Afterpay Ltd (ASX: APT) is yet again the talk of the investing town this week. Depending on whether you’re an Afterpay shareholder, you’ll probably either be opening yet another bottle of champagne or performing another eye-roll at what’s been happening with the Afterpay share price of late.

Let’s roll through the numbers just so we’re all on the same page here.

The Afterpay share price started the year at $30.63. In the pandemic-induced March share market crash, Afterpay shares plummeted, reaching a low of $8.01 on 23 March. Since then, Afterpay hasn’t looked back. The shares quickly rebounded back to $20, then $30. Then news broke that Chinese e-commerce giant Tencent Holdings had acquired a 5% stake in the company and the shares went ballistic. A series of record highs fell like dominoes. $50, $60, $70… for a while there, it seemed like the Afterpay share price had found a ceiling. Between 21 July and 18 August, the shares just hovered around $75 without too much movement.

But then reporting reason came and the shares took off again. Afterpay told investors last week that it expected its net transaction loss (NTL) as a percentage of underlying sales to come in better than previously anticipated. It also told the market that earnings would come in around $44 million instead of the $20-25 million previously flagged.

And it was off to the races yet again. Since that announcement was made public last Wednesday, the Afterpay share price is up another 21% and has reached a new, all-time high of $95.97 just this morning.

Now for the part you’ve all been waiting for. Since 23 March, Afterpay shares are up an eye-watering 1,098%, going off today’s new all-time high. Yes, we have on our hands a 5-month 10-bagger stock.

Afterpay shares: to the moon or back to earth?

So where to from here? Well, I’ve looked at Afterpay from both sides now, and still, somehow, it’s fairly easy to label Afterpay as either the ASX’s biggest bubble or a future $200 share. Yes, the company is growing gangbusters. Yes, it has an incredibly large potential growth runway. But it is still priced at ~$25.5 billion without any profits yet rolling through the door. This morning, Afterpay reported a statutory loss of $22.9 million. Saying that, with net income growth of 97% year on year, it won’t be long until Afterpay’s books are in the green.

The bottom line is that Afterpay is a great company and one growing at breakneck speed. It is now being fully priced as such though, with perhaps some sugar and cherries on top. I’m not interested in buying such a frothy and feverish share price at a record high, but if you are prepared to, you’d better be strapped in for the long run, in my view. I think there is a fair chance the Afterpay share price will experience a pull-back at some time down the road, so you might want to wait for such a situation.

But perhaps you shouldn’t listen to me, I’ve been wrong on this company far too many times in the past. Maybe I don’t know Afterpay at all…

More reading

• Afterpay reckons this 1 number shows its ‘moat’
• What Prospa’s share price reaction and profit results mean for ASX banks
• Where to invest in a ‘rip-roaring’ share market rebound
• ASX 200 jumps 0.7%: Afterpay reaches 9.9 million customers, Woolworths strong sales growth
• Afterpay share price in focus after stellar FY 2020 result

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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