Tag: Motley Fool

The Fortescue Metals Group Limited (ASX: FMG) share price is climbing higher again on Wednesday.

In morning trade the iron ore producer’s shares climbed 1.5% to a new record high of $21.81.

Why is the Fortescue share price climbing higher?

Investors have been buying Fortescue’s shares this morning following the release of a positive announcement.

According to the release, the company has achieved a significant milestone in the development of its iron ore operations in the Pilbara. Today it is celebrating the first ore through the ore processing facility at the Eliwana mine and rail project in the Western Hub.

Fortescue’s Chief Executive Officer, Ms Elizabeth Gaines, believes Eliwana as important step forward for the company.

She commented: “Eliwana is the next important stage of development of Fortescue’s world-class, integrated operations. Exploration commenced in this area in 2006, and we have now delivered a new 30 million tonne per annum dry ore processing facility and infrastructure, along with 143 kilometres of rail which is in the final stages of construction.”

“Eliwana will see us maintain our low-cost status and provide us with greater flexibility across our product mix. Construction of the mine, village and infrastructure was completed safely over a 12-month period, in line with budget and schedule,” Ms Gaines added.

Diverse workforce.

The company rightfully believes a diverse workforce is integral to the company’s success.

Pleasingly, Fortescue continues to provide training and employment opportunities for Aboriginal people, who represent 14% of the Eliwana operations workforce.

In addition to this, the company notes that 23% of its Eliwana operations team are women. This is contributing to its commitment to increase gender diversity across all operations.

What’s the latest on the iron ore price?

The good news for Fortescue and its shareholders is that the iron ore price is still trading at sky high levels.

According to CommSec, the spot iron ore price was fetching US$149.95 a tonne overnight, a further increase of 1.6%.

This compares incredibly favourably to Fortescue’s C1 costs guidance of US$13.00 to US$13.50 per wet metric tonne in FY 2021.

More reading

• Iron ore exports unlikely to slow down amid Australia–China trade tension: experts
• 2 excellent ASX dividend shares with 6%+ yields
• Top ASX shares making record all-time highs
• Leading brokers name 3 ASX shares to buy today
• ASX 200 up 0.7%: Metcash impresses, BHP & Fortescue storm higher, Xero given buy rating

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Fortescue (ASX:FMG) share price hit a record high today appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/36Y1K6z

The Emerge Gaming Limited (ASX: EM1) share price has returned from its lengthy suspension and crashed lower on Wednesday.

In morning trade the eSports and gaming technology company’s shares sank as much as 50% to 5.2 cents.

At the time of writing, the Emerge Gaming share price is down 41% to 6 cents.

This is also down 65% from its peak of 17 cents in October.

Why is the Emerge Gaming share price crashing lower?

After the market close on Tuesday, Emerge Gaming released an update on the registrations for its MIGGSTER social gaming platform.

In October the company claimed to have over 6 million pre-registrations for the platform, which costs $12 a month or $113 a year for a subscription.

This caught the eye of both investors and stock exchange operator ASX Ltd (ASX: ASX).

The latter appeared concerned by these numbers and over the last few weeks has sent a series of queries to Emerge Gaming.

With the platform now live, the company has been able to reveal just how many of these 6 million pre-registrations have actually signed up.

How many subscriptions has Emerge Gaming achieved?

According to its update, Emerge Gaming has sold a total of 25,674 subscription as of 7 December.

This comprises 20,615 annual packages, 1,662 six-month packages, and 3,397 monthly packages. A quick calculation shows this to be worth approximately $2.5 million in revenue. Though, this doesn’t include any potential revenue sharing with its partners.

Despite so far only converting 0.43% of its pre-registrations, management remains upbeat on its subscriptions.

It commented: “MIGGSTER subscriptions continue to show encouraging growth and Emerge will continue to provide the market with material updates as they transpire.”

However, judging by the Emerge Gaming share price performance on Wednesday, it doesn’t appear as though investors are as optimistic as they are.

More reading

• Why the Tali Digital (ASX:TD1) share price is surging again today
• The Telix (ASX:TLX) share price is on the move today. Here’s why.
• Market crash 2020: I’d buy today’s cheap stocks to retire early
• Healius (ASX:HLS) share price jumps 6% on update and $200m share buyback plan
• Commonwealth Bank (ASX:CBA) share price higher on divestment update

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Emerge Gaming (ASX:EM1) share price crashed 50% lower today appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2Iwy9b6

The Tali Digital Ltd (ASX: TD1) share price jumped 45% higher to 5.4 cents yesterday after the company announced it inked an investment and advertising agreement with Brand Capital International (BCI) and The Times Group of India.

Today, the Tali Digital share price continues its upward surge following the company’s announcement of its first Japanese patent by the Japan Patent Office (JPO). At the time of writing, Tali Digital shares have increased another 3.7% to 5.6 cents.

What is Tali Digital? 

Tali Digital is a micro cap medical technology company, focused on the development of game-based training programs to assess and treat childhood attention difficulties. Its programs have been proven through scientifically validated clinical trials to improve attention capabilities by strengthening underlying attentional processes. 

The company has achieved a number of significant milestones including the commercial roll out of its ‘Tali Detect’ and ‘Tali Train’ products, regulatory clearance in the United States and European Union, and app store release in India. 

The Tali share price has almost doubled in the last two weeks from 3 cents to its current level of 5.6 cents. This follows the company’s positive market updates and a significant increase in trading volumes for its shares. 

What’s moving the Tali share price again today?

Tali shares are on the move again after the company reported the Japanese patent covers its Tali Detect and Tali Train products as well as its soon to be released Tali maintenance program. 

Japan is the world’s third-largest market for ADHD treatments and is growing at more than 20% annually. ADHD is a major issue among the Japanese population of 15 million children under 15 years.

According to Tali, this is the first time a patent has been granted in Japan for a cognitive assessment and training system, capable of improving attentional skills for sustained periods. 

Tali sees favourable Japanese market dynamics where non-pharmaceutical based approaches are the preference in ADHD treatment. A CCHR report, ‘ADHD labelling and treatment of Children in Japan’ highlights that treatment with medication for ADHD is less favourable than psychological treatment. The report goes on to recommend “that psychotropic drugs are prescribed as a measure of last resort and only after an individualised assessment of the best interests of the child”. 

Tali sees the granting of the Japanese patent as a significant opportunity and potential market advantage for its digital therapeutics. Tali Digital Managing Director Glenn Smith said:

The granting of the patent secures Tali’s intellectual property position and paves the way for the Company to enter the Japanese market via a partnership model. With over 15 million children in Japan, under the age of 15 years, the country represents a large potential market for the range of Tali cognitive assessment tools. The ability to leverage our patents strengthens our software in multiple regions and highlights the global opportunity of our product suite.

More reading

• Why the Tali Digital (ASX:TD1) share price is surging 30% today
• Why the Tali Digital (ASX: TD1) share price has rocketed 40% today

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Tali Digital (ASX:TD1) share price is surging again today appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3qF5jqc

The Telix Pharmaceuticals Ltd (ASX: TLX) share price is trading lower at open today, despite a positive development in its lead drug candidate. Telix announced that the United States Food and Drug Administration (FDA) will begin reviewing its new drug application (NDA) for TLX591-CDx.

At the time of writing, the Telix share price has dipped 0.8% to $3.72.

FDA progress

Telix advised the market today that the US FDA has deemed that the company’s NDA for TLX591-CDx is sufficient, and will begin a formal review.

During the standard review process, the FDA will conduct a mid-cycle review meeting date with Telix. This engagement seeks to discuss the status of the drug, key findings, and any issues that are identified. Telix revealed that the meeting will take place on 16 February 2021.

In addition, a label review date with the FDA will follow, with the date set on 30 May 2021. In the meeting, a team of technical experts will look to verify that the correct labelling meets FDA regulations.

Telix also said the FDA has provided intermediate milestones for the review process, and that no major issues have been found so far. In light of this, the FDA does not plan to hold an advisory committee meeting to discuss the application.

While Telix progresses with the FDA, the company is also focusing its efforts in the European Union, Canada and Australia. Telix advised it is moving along with its marketing authorisation application which has been submitted to authorities.

What did management say?

Telix CEO Dr Christian Behrenbruch welcomed the progress, saying:

With proximal review timelines for our NDA submission and considering the recent limited approval of Ga-PSMA for both imaging of high risk men prior to prostatectomy and biochemical recurrence, we feel our package is in a strong position to complete review in a timely fashion.

Telix’s kit-based formulation of Ga-PSMA is a game changer in terms of delivering access to this important technology and we look forward to working with the FDA to conclude the technical and clinical review of our submission during 2021.

About the Telix share price

The Telix share price has been storming higher lately due to a raft of announcements from the company. In just over a month, its shares have lifted more than 70%.

The Telix share price reached an all-time high of $4.33 this month, and finished the day yesterday at $3.75.

More reading

• Telix (ASX:TLX) share price slips despite priority review status
• Why Flight Centre, Fortescue, Kogan, & Telix shares are racing higher
• Why has the Telix (ASX:TXL) share price shot up 5% today?
• Why Laybuy, Mesoblast, Sandfire, & Telix shares are charging higher
• Why the Telix (ASX:TLX) share price is up 9% to a new record high today

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post The Telix (ASX:TLX) share price is on the move today. Here’s why. appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/37Joarz

The 2020 stock market crash has left many shares trading at relatively cheap prices. Ongoing risks such as the coronavirus pandemic and political uncertainty in Europe mean that the valuations of some companies have failed to rebound to their 2019 levels.

As such, there may be buying opportunities available on a long-term basis. Over time, the valuations of today’s cheap stocks could improve. In doing so, they could aid an investor in building a retirement nest egg from which to draw a passive income in older age.

Cheap stocks after the 2020 stock market crash

The 2020 stock market crash has caused investors to re-evaluate their views on a number of sectors. For example, companies operating in industries that are being directly impacted by a weak economic outlook have seen their valuations come under severe pressure. They include sectors such as banking, energy and travel & leisure, where the profit growth potential of many businesses is likely to disappoint in the short run.

While some cheap stocks have weak financial positions and lack competitive advantages over their peers, others may currently be undervalued. Investors may have devalued companies operating in unfavourable sectors without understanding their recovery potential, for example. This may provide long-term investors with an opportunity to use the 2020 market crash to their advantage, in terms of buying high-quality companies at a discount to their intrinsic values.

A stock market recovery

Today’s cheap stocks could deliver strong recoveries from the 2020 stock market crash. Ultimately, an improving economic outlook that provides more prosperous operating conditions is likely to come into existence over the coming years. The world economy has, after all, always recovered from its periods of decline to post positive GDP growth. And, with large amounts of fiscal and economic stimulus having already been announced in major economies, the outlook for the world economy could improve significantly in the coming years.

With undervalued shares having significant capital appreciation potential, they may offer a sound means of generating a retirement nest egg. Their appeal on a relative basis seems to be high. A sustained period of low interest rates could be ahead. This may mean that the returns on cash and bonds fail to beat inflation by a substantial amount. And, with high house prices being present in many economies, the prospects for property investors may be less attractive than for those investors who buy cheap stocks after the stock market crash.

A long-term outlook

Clearly, a recovery after the market crash may take some time for today’s cheap shares. However, by taking a long-term view and holding high-quality companies through a likely bull market, an investor could improve their retirement prospects. They could even outperform the stock market through using its volatility to their advantage in the coming years.

More reading

• Healius (ASX:HLS) share price jumps 6% on update and $200m share buyback plan
• Commonwealth Bank (ASX:CBA) share price higher on divestment update
• What’s wrong with the Zip (ASX:Z1P) share price?
• 3 quality SaaS ASX shares to buy
• 3 reasons why Xero (ASX:XRO) shares are doing so well

Motley Fool contributor Peter Stephens 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 Market crash 2020: I’d buy today’s cheap stocks to retire early appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2IwwQsI

The Healius Ltd (ASX: HLS) share price is charging higher on Wednesday following the release of an update.

At the time of writing, the healthcare company’s shares are up 6% to $3.85.

What did Healius announce?

This morning Healius provided investors with an update on its performance so far in FY 2021 and its plans for some of the funds raised from its medical centres sale.

In respect to the former, management revealed that Healius’ performance has been strong and its volumes are improving.

Pathology.

The Pathology business continued its strong revenue growth in October and November. This was driven by a mix of COVID-19 testing volumes and the on-going recovery of non-COVID-19 revenues.

Community COVID-19 testing remains broadly within a band of 7,000 to 10,000 per working day, whereas commercial COVID-19 testing is continuing to grow.

Its non-COVID revenues are trending up to be flat year-on-year.

Imaging.

The Imaging business has delivered sustained growth in revenues in all states in October and November. This was driven by both volumes and average fee growth, other than in Victoria and South Australia.

In Victoria, activity is returning rapidly with the easing of restrictions and revenue was above the prior corresponding period in November.

In South Australia, the COVID-19 related shutdown temporarily impacted revenues in November. Though, revenues are still ahead year to date.

Day Hospitals.

Day Hospitals revenue was materially ahead of the prior corresponding period in October and November.

Management notes that Montserrat is delivering good returns with Westside at record levels. The Adora Fertility business is also performing well with record cycles in November.

On-market buyback.

Last month the company completed the sale of its medical centres to BGH Capital. This led to the company receiving proceeds of $483 million.

This morning the company has announced a new capital management plan which aims to facilitate strategy, optimise shareholder returns, and manage uncertainties.

Part of this will see the company undertake an on-market share buy-back of up to $200 million in 2021. This remains subject to the Healius share price and market conditions.

It has also revised its dividend payout ratio to a target of 50% to 70% of reported net profit after tax.

More reading

• Brokers name 3 ASX shares to buy right now
• Why the Healius (ASX:HLS) share price edged higher today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Healius (ASX:HLS) share price jumps 6% on update and $200m share buyback plan appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2LlpU2H

The Commonwealth Bank of Australia (ASX: CBA) share price is edging higher following the release of an announcement.

At the time of writing, the banking giant’s shares are up slightly to $81.96.

What did Commonwealth Bank announce?

This morning Commonwealth Bank provided an update on the sale of its equity interest in BoCommLife Insurance and other divestments.

According to the release, the China Banking and Insurance Regulatory Commission (CBIRC) has granted approval for the divestment of the bank’s 37.5% equity interest in BoCommLife to MS&AD Insurance Group, the parent company of Mitsui Sumitomo Insurance.

Management revealed that the final sale proceeds are expected to be $886 million and the divestment of the equity interest in BoCommLife is expected to complete by 31 December.

Non-cash gain revisions.

Commonwealth Bank also announced that it has revised the calculation of non-cash gains and losses on disposal of previously announced divestments. This includes BoCommLife, CFS, CFSGAM, CommInsure Life and Ausiex.

The revisions include the finalisation of accounting adjustments for goodwill, foreign currency translation reserve recycling, and updated estimates for transaction and separation costs.

The total increase in unaudited post-tax statutory earnings related to the completion of BoCommLife and other divestments is expected to be approximately $840 million. This will be recognised as a non-cash item in the first half result.

Management advised that the capital impact of these divestments is a pro-forma uplift to its Common Equity Tier 1 (CET1) ratio of 29 basis points. This is based on its risk weighted assets as of 30 September.

Finally, it explained that the completion of the divestment of CommInsure Life is now currently expected to occur via a statutory asset transfer in the second half of FY 2021. As a result, the completion of the BoCommLife divestment does not affect the completion timing of the CommInsure Life divestment.

More reading

• Here are the ASX bank shares rated as a buy today
• Which ASX 200 sectors performed the best in November? 
• Banks rejoice: House prices to return to 2019 levels
• ASX 200 rises on Tuesday
• CBA (ASX:CBA) and the ASX banks just had an amazing month

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Commonwealth Bank (ASX:CBA) share price higher on divestment update appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/36Vg6oq

Zip Co Ltd (ASX: Z1P) shares have been far from inspiring lately, slumping to a 6-month low of $5.29 on Tuesday. The Zip share price has now fallen to levels not seen since before the company announced its entry into the United States via the acquisition of US-buy now, play later (BNPL) player QuadPay back in June. With the S&P/ASX 200 Index (ASX: XJO) just 6% away from its pre-COVID highs and a recovery in tech shares, what is wrong with the Zip share price?  

It’s not just Zip 

Zip isn’t the only BNPL company that’s experiencing significant underperformance. As a matter of fact, all BNPL players except Afterpay Ltd (ASX: APT) and Humm Group Ltd (ASX: HUM) have been sold off recently with similar price charts. 

The Splitit Ltd (ASX: SPT) share price fell 6% on Tuesday and is down almost 40% from its August highs. The $1.10 level also marks a 6-month low for Splitit shares. Similarly, the Sezzle Inc (ASX: SZL) share price is at 6-month lows and trading at nearly half its August high of $11.35. Even the newest BNPL addition to the ASX, Laybuy Holdings Ltd (ASX: LBY) has fallen below its initial public offering (IPO) price of $1.41 per share to close at $1.30 on Tuesday. 

Afterpay holding on 

The Afterpay share price is the only BNPL company on the ASX not to fit the broader narrative of being at a 6-month low and a 30-50% discount to its August highs. 

This week, big brokers reiterated their stance on Afterpay shares with Credit Suisse initiating an outperform rating and $124.00 price target and Goldman Sachs retaining its neutral rating with a $99.90 price target. The brokers anticipate a strong growth outlook, especially in US operations. 

One of the key differences between Afterpay and its competitors is the company’s focus on international expansion. It launched into Canada in August with a number of large merchants now live, integrating or signed. Furthermore, it has its eyes set on the rest of Europe via the acquisition of Pagantis. Afterpay cites it is on track to complete the acquisition by the end of the 2020 calendar year, which will grant it an immediate licence to operate in Spain, Fance, Italy and Portugal, as well as pending licence passport applications in Germany and Poland. 

UBS cautious on Zip share price 

Last week, UBS Group raised its Zip share price target from $5.50 to $5.70 but retains its sell rating. Zip’s October and November sales numbers were ahead of its expectations with the US tracking well. Despite the UBS upgrading its FY21 and FY22 earnings, it believes that current price levels limit value proposition, hence the sell rating. 

More reading

• Which shares will benefit from trillions of dollars in new global stimulus?
• Zip and Creso Pharma were among the most traded shares on the ASX last week
• Why G8 Education, Metcash, Woodside, & Zip shares are dropping lower
• ASX 200 rises on Monday
• The sector that’ll explode in February: fundie

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post What’s wrong with the Zip (ASX:Z1P) share price? appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2VW6p2w

This article is about three software as a service (SaaS) ASX tech shares that could be worth a spot on your watchlist.

Here they are:

Volpara Health Technologies Ltd (ASX: VHT)

According to the ASX, Volpara has a market capitalisation of around $350 million.

Volpara is a digital health company focused on early detection of breast cancer by improving the quality of screening using artificial intelligence (AI).

In its recent FY21 half-year result it reported that its annual recurring revenue (ARR) increased by approximately 27% to NZ$19.9 million with subscription revenue rising by 71% to NZ$8.8 million.

Around 27% of women in the US had one of Volpara’s products applied on their images and data, compared to 25.8% at the end of the prior corresponding period.

In that same result, the SaaS ASX share’s gross profit margin improved from 89% to 92% and its average revenue per user (ARPU) grew 4.5% to US$1.16.

Volpara aims to continue to have a high retention rate, increase ARPU, win new customers, upsell with existing customers and perhaps make acquisitions.

Xero Limited (ASX: XRO)

According to the ASX, Xero has a market capitalisation of $20.3 billion.

Xero is a cloud accounting software company for small and medium business customers. It provides a number of automation and time-saving tools for business owners, bookkeepers, accountants and other professionals. The tools and numbers are provided in a easy-to-understand way.

Xero’s subscribers pay for their subscription every month, giving them access to their numbers anywhere at any time.

The SaaS ASX share’s FY21 interim result showed a 21% increase in the operating revenue, a 19% rise in subscribers, a 15% increase in annualised monthly recurring revenue and an 86% rise of earnings before interest, tax, depreciation and amortisation (EBITDA). The gross profit margin improved by another 0.5 percentage points to 85.7%.

In the UK, total subscribers rose by 19% to 638,000. Australian subscribers went up 21% to 1.01 million. ‘Rest of the world’ subscribers went up by 37% to 136,000. Its subscriber churn was very low during the period at just 1.11%.

Two of the biggest improvements were that its net profit after tax (NPAT) grew by approximately NZ$33 million to NZ$34.5 million and free cashflow jumped NZ$49.5 million to NZ$54.3 million.

Altium Limited (ASX: ALU)

According to the ASX, Altium has a market capitalisation of $4.76 billion.

Altium is an electronic PCB software business that helps engineers design the products, devices and vehicles of the future.

The SaaS ASX share has an array of large, global customers including Tesla, Space X, Amazon, Apple, Google, Disney, Cochlear Limited (ASX: COH), Broadcom, Qualcomm, John Deere and Honeywell.

Altium is pivoting its business towards the cloud with a product called Altium 365 which will allow teams to collaborate easier. Aside from providing a better service for customers, this will also create direct and indirect monetisation opportunities for Altium whether it’s based on transactions (like the Airbnb model) or premium services (such as the Amazon Prime model).

However, according to management, Altium’s move to the cloud is from a position of strength and does not force its customers to change either their licensing model or the way they use Altium’s existing software.

In FY20 Altium reported a 17% increase in Altium Designer subscribers, with revenue rising by 10% to US$189.1 million and EBITDA going up by 13% to US$75.6 million. The EBITDA margin increased to 40%, up from 38.9%.

In FY21 Altium is expecting to grow revenue by 6% to 12% in a range between US$200 million to US$212 million.

More reading

• 3 reasons why Xero (ASX:XRO) shares are doing so well
• Why Creso Pharma and these ASX shares just hit 52-week highs or better
• Top ASX shares to buy in December 2020
• Top ASX shares making record all-time highs
• 2 of the best ASX tech shares you can buy today

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium and VOLPARA FPO NZ. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and Xero. The Motley Fool Australia has recommended Cochlear Ltd. and VOLPARA FPO NZ. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 3 quality SaaS ASX shares to buy appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2VTGJ6L

Xero Limited (ASX: XRO) shares have gone up over 70% over the past six months.

In this article are three reasons why Xero has been doing so well over the months and years:

A quick overview of Xero

Xero is a cloud accounting software company for small and medium business customers. It provides a number of automation and time-saving tools for business owners, bookkeepers, accountants and other professionals. The tools and numbers are provided in a easy-to-understand way.

Xero’s subscribers pay for their subscription every month, giving them access to their numbers anywhere at any time.

The cloud accounting businesses provides its services in many countries including New Zealand, Australia, the US, the UK, Singapore, South Africa and Canada.

In the recent FY21 half-year result it reported that there was a 21% increase in the operating revenue, a 15% increase in annualised monthly recurring revenue and an 86% rise of earnings before interest, tax, depreciation and amortisation (EBITDA). Net profit after tax (NPAT) grew by approximately NZ$33 million to NZ$34.5 million and free cashflow jumped NZ$49.5 million to NZ$54.3 million.

Here are three reasons for Xero shares are doing so well:

Strong subscriber growth

An integral part of Xero’s growth is its subscriber growth, which increases its monthly revenue. In FY20 its total subscribers went up by 19% to 2.45 million. However, partly due to COVID-19 impacts, its net subscriber additions declined by 30% to 168,000.

In the UK, total subscribers rose by 19% to 638,000. Australian subscribers went up 21% to 1.01 million. ‘Rest of the world’ subscribers went up by 37% to 136,000. North American subscribers rose by 17% to 251,000 and New Zealand subscribers went up by 13% to 414,000.

Its subscriber churn was very low during the period at just 1.11%. The total lifetime value of subscribers increased by 15% to NZ$6.17 billion.

High and still rising gross profit margin

A gross profit margin explains how profitable a business is after paying for its most essential costs to sell a product. Each business classifies differently what counts as the cost of selling its goods or services in terms of the gross margin.

For the six months ending 30 September 2020, Xero had a gross profit margin of 85.7%, which was an increase of 0.5 percentage points compared to the prior corresponding period.

This means a large majority of the new revenue falls to the next level of Xero’s accounts, which partly explains how a 21% increase in operating revenue led to a 86% increase of the EBITDA.

Platform network effects

Xero doesn’t just provide accounting software for one user to access. It can provide multi-tiered access to everyone in an organisation, from a simple employee payroll access level, all the way up to administrator. Businesses can also invite bookkeepers, accountants, financial advisors and others as well.

Subscribers can get access to a number of different third party applications through the Xero platform, which increases the value of the overall Xero package to the subscriber and can increase loyalty.

The company allows businesses to use Xero’s software as a centre of operations for everything, not just an accounting system.

What’s the Xero valuation?

Xero is purposefully re-investing most of its profit back into growth for the business, somewhat like the Amazon strategy. It isn’t trying to make a profit (yet). The increased profit it made in the FY21 interim report was a result of temporarily lowering spending because of COVID-19. In terms of market capitalisation, it has a market value of just over $20.5 billion. Using Commsec estimates, it’s valued at 126x FY23’s estimated earnings. 

More reading

• 3 quality SaaS ASX shares to buy
• Why Creso Pharma and these ASX shares just hit 52-week highs or better
• Top ASX shares to buy in December 2020
• Top ASX shares making record all-time highs
• 2 of the best ASX tech shares you can buy today

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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 3 reasons why Xero (ASX:XRO) shares are doing so well appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/39S8VPJ