Tag: Motley Fool

The market may be pushing higher today but the same cannot be said for the WiseTech Global Ltd (ASX: WTC) share price.

At the time of writing the logistics solutions company’s shares are down 2% to $28.75.

Why is the WiseTech Global shares price dropping lower?

Investors have been selling WiseTech Global’s shares on Thursday after it revealed that its founder and co-founder have been selling down their holdings.

The company’s Founder and Chief Executive Officer, Richard White, has sold a total of 349,504 shares through a series of on-market trades between 27 August and 2 September 2020.

Mr White received an average of approximately ~$28.49 per share or a total consideration of $9,959,109.

Despite this sizeable sale, Mr White still has an interest of 139,699,669 WiseTech Global shares.

Also selling shares was the company’s Co-Founder and Executive Director, Maree Isaacs. She sold a total of 15,472 shares through a series of trades across the same days. Ms Isaacs received an average of $28.50 per share or a total consideration of ~$441,000.

This leaves the executive director with an interest of 11,408,693 shares.

Share sales to continue.

According to the release, these are the first in a series of planned share sales by the company’s CEO over the next four months.

The release explains that these share sales have been undertaken as part of a trading program which will continue until 31 December 2020, subject to no material, non-public information arising during this period.

Mr White intends to sell down a minor portion of his shareholding to facilitate liquidity in the company’s shares and enable some diversification of his assets.

He said: “I am excited about WiseTech’s future growth opportunities and continue to be as committed and driven as ever, on achieving our global growth ambitions. We are gaining momentum in driving revenue growth, with four new global customers signed up in the first seven months of calendar 2020 and a strong pipeline of further global deals.”

“As we continue to execute on our market penetration strategy, it is pleasing to see interest from new, long-term investors wanting to be part of our growth journey. This is why it is important to enhance the liquidity of our stock through an orderly process and in a way that will benefit all of our shareholders,” he concluded.

Also experiencing heavy insider selling today have been Bigtincan Holdings Ltd (ASX: BTH) and Xero Limited (ASX: XRO). Unsurprisingly, their respective shares are dropping lower along with WiseTech Global.

More reading

• My top 5 ASX shares to buy in 2020
• 2 top ASX tech shares to buy and hold beyond 2025
• What’s sent WiseTech’s share price up 36% so far in August
• Why the Xero share price can crack $100 per share in 2020
• These ASX shares were top performers last week

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of WiseTech Global and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends BIGTINCAN FPO. The Motley Fool Australia owns shares of and has recommended BIGTINCAN 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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This morning the BHP Group Ltd (ASX: BHP) share price is likely to trade lower when its shares go ex-dividend for its fully franked 55 U.S. cents per share final dividend.

This dividend will then be paid to eligible shareholders later this month on 22 September.

While some shareholders will be using this as income in this low interest environment, others may wish to reinvest the funds back into the share market.

For the latter group, here is where I would consider investing BHP’s dividends:

Cochlear Limited (ASX: COH)

If you’re looking to invest these funds into a quality growth share, then you could do a lot worse than Cochlear. I think the global leader in implantable hearing devices has the potential to generate strong returns for investors over the next decade. This is thanks to its exposure to the ageing populations tailwind, which looks set to underpin growing demand for hearing solutions products over the long term. And with the Cochlear share price down 25% from its 52-week high due to the pandemic, I think now could be an opportune time to invest.

Rural Funds Group (ASX: RFF)

If you want even more dividends then you might want to consider Rural Funds. It is a leading agriculture-focused property group with a diverse portfolio of assets which are spread across several industries and leased to some of the biggest players in the market. One big positive is the long term certainty that Rural Funds’ leases offer investors. With a weighted average lease expiry of almost 11 years and rental increases built in, Rural Funds appears perfectly positioned to deliver on its target of increasing its distribution by 4% per annum over the long term. Based on the current Rural Funds share price and its guidance for FY 2021, it offers investors a generous forward 5% distribution yield.

More reading

• Why a recession shouldn’t matter for the ASX share market
• 5 things to watch on the ASX 200 on Thursday
• Some ASX winners and losers from a high Aussie dollar
• 2 high quality and growing ASX dividend shares
• A strange thing is happening with index funds…

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia has recommended Cochlear 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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Is the Kogan.com Ltd (ASX: KGN) share price a strong buy? It has been a great performer since the COVID-19 crash.

Indeed, over the past six months the Kogan.com share price has risen by 390%. The ecommerce business has done incredibly well at capturing retail market share. 

Whilst the situation with the global pandemic is tragic, Kogan.com has experienced an enormous rise in demand for its services. Customers have still wanted to buy phones, laptops and so on. 

The FY20 result was very impressive. Gross sales increased by 39.3% to $768.9 million and revenue went up by 13.5% to $497.9 million. Gross profit increased by 39.6% to $126.5 million. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 57.6% to $49.7 million and net profit after tax (NPAT) grew by 55.9% to $26.8 million.

The second half of the 2020 financial year, which included COVID-19, was particularly strong. Gross sales, gross profit and adjusted EBITDA grew by 62.5%, 68.3% and 74.1% respectively. Those are strong growth numbers. With growth like that, it’s no wonder the Kogan.com share price has gone up so much.

Kogan.com is not an early-stage growth business. It’s not an unprofitable buy now, pay later business. It’s making real profit and it’s even paying a dividend. Kogan.com declared a fully franked final dividend of 13.5 cents per share, up 64.6% on the prior year. Long-term shareholders are now getting a very good yield on their original purchase cost. 

The online business grew its active customer base by 35.7% to 2.18 million people. Kogan.com is the type of business that can really excel with network effects. It offers so many different services like mobile, insurance and superannuation. The company can work on selling a wider variety of services which should lead to higher margins.

Is the Kogan.com share price a strong buy today?

It can be a mistake to think that something is expensive just because it has gone up in price. A few years ago there was a buying frenzy for A2 Milk Company Ltd (ASX: A2M) infant formula. The A2 Milk share price has gone from $1.80 in September 2016 to $16.84 today. I’m not suggesting that the Kogan.com share price will be worth $200 in a few years, but it shows that a high-growth business can keep growing for longer than expected.

In July 2020 Kogan.com saw gross sales grow by more than 110%, gross profit increased by more than 160% and adjusted EBITDA was more than $10 million. Remember that FY20’s total adjusted EBITDA was $49.7 million. The growth seems to be accelerating.

At the current Kogan.com share price it’s trading at 50x FY21’s estimated earnings. That doesn’t look bad if the ASX share can continue a good growth rate for the medium-term.

But how long can this growth last? I have a feeling that some of the overall strong retail demand may slow down once the government stimulus starts to taper off. ASX retail shares weren’t demonstrating this kind of growth in 2019.

However, Kogan.com does benefit from the fact that it’s an online business. Some consumers may well permanently switch to online shopping rather than going to a physical store. Just look at how well Temple & Webster Group Ltd (ASX: TPW) is doing as an online retailer.

If you could travel back in time then obviously it would make sense to buy shares when the Kogan.com share price was under $5. But what about now? I don’t think Kogan.com is a ‘strong’ buy. However, I think that Kogan.com’s expanding product range and growing customer base will support growing earnings over the long-term.

I believe that it is worth a long-term buy today because the online shopping trend seems like a permanent shift and this should help Kogan.com’s earnings considerably. I’d be happy to accumulate during dips. As a bonus, Kogan.com offers a grossed-up dividend yield of 1.4%.

More reading

• Why a recession shouldn’t matter for the ASX share market
• Why it makes sense to invest in ASX tech shares
• What do you do after record share price gains?
• If you invested $10,000 in Kogan shares 5 months ago, here’s how much you’d have today
• How to invest in ASX shares in uncertain times?

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 Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster 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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The Australian share market was on form on Wednesday and stormed notably higher.

While the majority of shares on the market pushed higher with the market, a few shares climbed so much they hit 52-week highs or better.

Here’s why these ASX shares just scaled to new heights:

Bigtincan Holdings Ltd (ASX: BTH)

The Bigtincan share price was on form again on Wednesday and stormed to a record high of $1.30. Investors have been fighting to get hold of the AI-powered sales enablement automation platform provider’s shares since the release of its full year results last month. In FY 2020, Bigtincan reported revenue growth of 56% to $31 million and annualised recurring revenue (ARR) growth of 53% to $35.8 million. The good news is that more of the same is expected in FY 2021. Management provided ARR growth guidance of 36.9% to 48% year on year.

Brainchip Holdings Ltd (ASX: BRN)

The Brainchip share price rocketed an incredible 58% higher to a record high of 49 cents on Wednesday. Investors were buying the artificial intelligence technology company’s shares after it announced a collaboration with VORAGO Technologies. This collaboration is intended to support a Phase 1 NASA program for a neuromorphic processor that meets spaceflight requirements. Brainchip notes that its Akida neuromorphic processor is uniquely suited for spaceflight and aerospace applications. The device is a complete neural processor and does not require an external CPU, memory or Deep Learning Accelerator.

Costa Group Holdings Ltd (ASX: CGC)

The Costa share price continued its positive run and stormed to a 52-week high of $3.74. The catalyst for this was the release of its half year results on Friday of last week. For the six months ended 28 June 2020, the horticulture company posted revenue of $612.4 million. This was an increase of 6.8% on the prior corresponding period. And on the bottom line, Costa delivered a 12% in net profit after tax to $45.8 million. This was driven by a very strong performance from its international business. Investors appear to believe that Costa is finally over the worst of its issues now.

More reading

• Why Brainchip, De Grey Mining, Nufarm, & Pointsbet shares are storming higher
• Brainchip share price rockets 30% higher on NASA program collaboration
• 3 exciting ASX small caps to put on your watchlist
• Zip and Brainchip were among the most traded shares on the ASX last week
• Top ASX Stock Picks for September 2020

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends BIGTINCAN FPO. The Motley Fool Australia owns shares of and has recommended BIGTINCAN FPO and COSTA GRP 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.

The post Why Brainchip and these ASX shares just surged to new highs appeared first on Motley Fool Australia.

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The SKYCITY Entertainment Group Limited (ASX: SKC) share price will be one to watch on Thursday following the release of its full year results.

How did SKYCITY perform in FY 2020?

For the 12 months ended 30 June 2020, SKYCITY delivered a 36.8% increase in reported revenue from continuing operations to NZ$1,125 million. Things were even better for its reported profits from continuing operations. They came in 46.3% higher year on year at NZ$235.3 million.

However, this was entirely the result of insurance recoveries following the NZICC fire. SKYCITY recorded a net gain of NZ$268.5m post-tax arising from these impacts. This offset weakness in the rest of the business.

On a normalised basis, it wasn’t quite as positive. Normalised revenue fell 24.3% to NZ$779.5 million and normalised net profit fell 59.7% to NZ$66.3 million.

In light of this profit decline, no final dividend was declared for FY 2020.

Outlook.

Management is expecting an improved performance in FY 2021.

It commented: “Assuming there is no adverse change to the current COVID-19 outlook in New Zealand and South Australia, we expect Group normalised EBITDA to be above FY20, but still below pre-COVID-19 and FY19 levels.”

“We expect the domestic businesses to continue to perform well when open (although we remain well prepared for the possibility of further closures), but are planning for negligible International Business and international tourism activity due to ongoing international border closures,” it added.

Trading update.

The company also provided a trading update, which revealed that its casinos are performing positively.

Its NZ Properties have recovered quicker than expected, with local gaming in Auckland and Hamilton trading ahead of pre-COVID levels. This has led to the segment being materially more profitable than anticipated.

It’s a similar story in Adelaide, with local gaming consistent with pre-COVID-19 levels. Its operations are both profitable and cashflow positive.

Finally, despite its casinos returning to relatively normal, its online casino business continues to perform well and is attracting new active customers. It has been EBITDA positive every month since April.

More reading

• ASX shares that could take a hit from New Zealand lockdowns
• Coronavirus: SkyCity share price falls as NZ restrictions tighten

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sky City Entertainment 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.

The post SKYCITY share price on watch after FY 2020 result and positive trading update appeared first on Motley Fool Australia.

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The latest GDP numbers are in. It’s official: Australia is in a recession after two negative quarters of GDP movement. I don’t think it matters for the ASX share market. 

The numbers released by Australian Bureau of Statistics (ABS) show that Australia’s GDP fell by 7% in the quarter ending 30 June 2020.

That’s a hefty fall. You may think that ASX would drop significantly in response to a large economic decline. Nope. The S&P/ASX 200 Index (ASX: XJO) rose by 1.8% yesterday.

Why the big rise? Well I don’t think investors were euphoric about the GDP numbers, the share market just reversed the decline from the day before.

I don’t think an Australian recession should mean too much for the ASX share market for a few reasons:

Timing

You have to remember how and when GDP numbers are calculated. The quarter that this decline relates to ended two months ago. We’re already two thirds of the way through the quarter ending 30 September 2020.

Meanwhile, the ASX share market is forward looking. The ASX 200 took a huge 36% plunge during February and March in anticipation of the future economic hit that COVID-19 impacts would cause businesses and the country.

Many ASX shares have already strongly recovered since that share market plunge. But the recession has only just been officially recognised. Victoria is still a drag on the overall picture, but nationally things are looking much better today than in April.

Relevance

GDP gives us an insight into the overall country’s economic picture. The ASX share market represents the opinion of the collective investor community about the future economic prospects of the listed businesses.

ASX shares don’t completely represent the national economy. For example, plenty of small and medium private businesses are doing it tough. But, ASX share retailers are doing very well. JB Hi-Fi Limited (ASX: JBH), Harvey Norman Holdings Limited (ASX: HVN), Adairs Ltd (ASX: ADH), Temple & Webster Group Ltd (ASX: TPW) and Kogan.com Ltd (ASX: KGN) all reported impressive sales numbers.

Whilst the overall economy is important to everyone who participates in it as well as politicians, it’s the performance of the individual business that matters for the share price and the dividend of a company like Wesfarmers Ltd (ASX: WES).

Expecting share prices to follow the economy’s movement could mean missing out on a better performance by the ASX share market. Listed businesses are among the best of the best in the country. The strongest brands, the best balance sheets, easy access to new capital and they usually have good online operations. They’re likely to be more resilient.

International growth

Australia’s GDP numbers obviously are focused on Australia’s economy.

But as investors we can decide to invest in a variety of businesses to get a much larger exposure to the global economy. For example, Macquarie Group Ltd (ASX: MQG) only earns a third of its profit from Australia – the other two thirds comes from places like Europe, North America and so on. That has helped Macquarie’s share price rebound more than domestic banks like Westpac Banking Corp (ASX: WBC).

CSL Limited (ASX: CSL) generates a lot of earnings from the US. Sonic Healthcare Limited (ASX: SHL) generates a large amount of its earnings from the northern hemisphere. There are lots of examples. The ASX share market has plenty of global options.

Sure, there are some ASX shares like National Australia Bank Ltd (ASX: NAB) that rely on Australian economic growth for profit growth. But plenty of other ASX shares like A2 Milk Company Ltd (ASX: A2M), Cochlear Limited (ASX: COH) and Goodman Group (ASX: GMG) generate large amounts of profit offshore. They don’t need a strong Australian economy to grow profit or the share price.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX 200 rises 1.8%, Afterpay had a volatile day
• The Future Fund is stockpiling cash. Should ASX investors take the hint?
• Latest ASX stocks brokers are urging you to buy today
• Praemium share price edges higher after Powerwrap offer goes unconditional

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 Cochlear Ltd., CSL Ltd., Kogan.com ltd, and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of A2 Milk and Wesfarmers Limited. The Motley Fool Australia has recommended Cochlear Ltd., Kogan.com ltd, Sonic Healthcare Limited, and Temple & Webster 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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On Wednesday the S&P/ASX 200 Index (ASX: XJO) returned to form and charged notably higher. The benchmark index jumped 1.8% to 6,063.2 points.

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

ASX 200 to charge higher again.

The ASX 200 looks set to continue its recovery on Thursday. According to the latest SPI futures, the benchmark index is expected to rise 39 points or 0.65% at the open. This follows an extremely positive night of trade on Wall Street which saw the Dow Jones storm 1.75% higher, the S&P 500 jump 1.55%, and the Nasdaq push 1% higher.

Xero insider selling.

The Xero Limited (ASX: XRO) share price will be on watch this morning after reports of some heavy insider selling. According to the AFR, Goldman Sachs helped the business and accounting software provider’s founder, Rod Drury, offload $198 million worth of shares. The shares were believed to have been offered at a 3.9% discount of $99.00 per share.

Oil prices sink lower.

It could be a bad day of trade for energy producers including Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) after oil prices sank lower overnight. According to Bloomberg, the WTI crude oil price is down 2.7% to US$41.60 a barrel and the Brent crude oil price has fallen 2.6% to US$44.40 a barrel. Weak gasoline demand in the United States put pressure on energy prices.

Gold price sinks lower.

Gold miners such as Newcrest Mining Limited (ASX: NCM) and Resolute Mining Limited (ASX: RSG) could come under pressure today after the spot gold price sank lower. According to CNBC, the spot gold price fell 1.45% to US$1,950.70 an ounce overnight. A rebound in the US dollar and economic recovery hopes weighed on the precious metal.

Shares trading ex-dividend.

Once again, another group of shares are going ex-dividend this morning and could trade lower. This includes mining giant BHP Group Ltd (ASX: BHP), private health insurer NIB Holdings Limited (ASX: NHF), financial services company Perpetual Limited (ASX: PPT), and utility infrastructure company Spark Infrastructure Group (ASX: SKI).

More reading

• ASX 200 rises 1.8%, Afterpay had a volatile day
• The Future Fund is stockpiling cash. Should ASX investors take the hint?
• Latest ASX stocks brokers are urging you to buy today
• Praemium share price edges higher after Powerwrap offer goes unconditional
• Strike Resources share price wanes despite moving closer to an off-take agreement

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia has recommended NIB Holdings 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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Fortunately, in this low interest rate environment, there are a good number of ASX shares paying investors handsome dividends.

Here are two ASX dividend shares that I think income investors should buy right now to beat low interest rates:

Coles Group Ltd (ASX: COL)

The first ASX dividend share to consider buying is this supermarket giant. I think Coles is one of the best options for income investors right now due to its attractive yield, defensive qualities, and positive long term growth outlook. The latter is thanks to a combination of food inflation, its refreshed strategy, defensive earnings, and expansion opportunities.

Overall, I believe this puts the company in a great position to grow its dividend at a consistently solid rate over the next decade. For now, based on the current Coles share price, I estimate that it offers an attractive fully franked ~3.2% FY 2021 dividend.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

A second option for income investors to consider buying right now is an exchange traded fund or ETF. I think the Vanguard Australian Shares High Yield ETF is great for investors that don’t have the funds to construct a diverse portfolio of ASX dividend shares. This is because this fund is invested in a total of 66 top shares which offer some of the most generous yields on the Australian share market.

These include the likes of Coles, the big four banks, BHP Group Ltd (ASX: BHP), and Telstra Corporation Ltd (ASX: TLS). Based on the current Vanguard Australian Shares High Yield ETF unit price, I estimate that it offers a FY 2021 dividend yield somewhere in the region of 4% to 5%. This is vastly superior to what you’ll find from a savings account or term deposits right now.

More reading

• Top ASX Stock Picks for September 2020
• Beat low interest rates with Coles and this ASX dividend share
• ASX 200 Weekly Wrap: Earnings drag ASX back to reality
• ASX reporting season heroes to buy for FY21
• 5 top ASX dividend shares you should never sell

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

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The Medical Developments International Ltd (ASX: MVP) share price has fallen hard since COVID-19 put the world at a standstill.

Between 19 February and 22 March, the Medical Developments share price took a sharp nosedive, falling from $11.26 to $3.92 – a 65% loss in the space of a month. Today, the Medical Developments share price has recovered some ground and finished the day up 2% to $5.90.

Despite recent gains, Medical Developments shares are still a long way off their all-time highs of $11.78, so shareholders may be wondering if the company will ever reach that level again.

What happened to Medical Developments in 2020?

The Australian-based healthcare company has had a bad run of luck. While it is easy to attribute the dramatic fall in the Medical Developments share price to COVID-19, that’s not the full story.

Sure, the company has been savaged by profit plunges in its FY20 report, released 2 weeks ago. However, a shock CEO exit and poor management decisions have led Medical Developments on a downhill run.

First and foremost, since the onset of coronavirus, sales from its flagship product Penthrox declined due to the state-wide lockdown laws, which saw decreased levels of sporting and outdoor activities. Furthermore, the company’s emergency services market experienced softening demand for the ‘green whistle’. This resulted in an 8% decline for FY20.

Unsurprisingly, its respiratory sales grew 61% underpinned by a record amount of equipment purchased relating to COVID-19.

Net profit after tax decreased by 63% to $0.37 million, compared to FY19’s $1.03 million.

The surprise resignation of long-term CEO John Sharman sent shareholders heading for the hills in early March. After 10 years of being at the helm of the company, John Sharman choose to pursue other business interests. Chair David Williams advised that the board would search for a leader that can spearhead its growth in the United States and Europe.

More recently, Medical Developments announced that it had reached an agreement with the Mundipharma network in Europe to take back the distribution rights for its own pain relief drug, Penthrox. Purchasing back the EU rights will cost the company 3 million euros and also include a 5% royalty payment on sales.

Across the Atlantic, Penthrox is still yet to be approved for sale in the United States. The company has a potential meeting with the Food and Drug Administration (FDA) towards the end of the year, with Phase II and Phase III trials still be undertaken. FDA approval is expected to be around late 2024.

Will the Medical Developments share price recover?

Before the fateful crash in the Medical Developments share price, the business had a price-to-earnings (P/E) ratio of 520. Today, the company’s P/E ratio is almost twice as much, sitting at 986. Investors have clearly priced in a lot of good things for the healthcare company, despite its recent misfortunes.

At a current market capitalisation of $390 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $2.69 million, it may be a while before the share price recovers anywhere near its all-time high.

Should you invest?

I think that a lot has to go right for Medical Developments to be a success. Sales have grown in some overseas countries, but the United States remains the biggest healthcare market.

In my opinion, I would prefer to look for a leaner business that is well-run and not wasting precious cashflow resources on re-purchasing rights that were once-sold off, especially in the current climate.

In light of this, I will be staying away and keeping my eye out for other opportunities.

More reading

• Medical Developments International share price tumbles on FY 2020 profit decline
• Why the Medical Developments International share price jumped 14% higher today

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Medical Developments International Limited. The Motley Fool Australia has recommended Medical Developments International 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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On Tuesday I looked at three small cap ASX shares which I think have the potential to grow much larger in the future. You can read about them here.

But if you’re not comfortable investing in small caps, then you might want to consider mid cap shares.

I like this side of the market as mid caps tend to carry less risk than small caps and greater potential returns than large caps.

With that in mind, here are two ASX mid cap shares I would buy:

BINGO Industries Ltd (ASX: BIN)

I think this $1.5 billion waste management company could be a great option for investors. While the pandemic is likely to weigh on its near term performance, it didn’t stop it from delivering a strong FY 2020 result. Thanks partly to its Dial a Dump Industries acquisition, BINGO delivered a 40.8% increase in underlying EBITDA to $152.1 million. 

I’m confident there will be further growth ahead for BINGO thanks to the aforementioned acquisition. This is because it has allowed the company to be fully vertically integrated from collections to landfill. It also makes it the largest player in building and demolition waste in Sydney and provides it with some much-needed diversification. 

Jumbo Interactive (ASX: JIN)

Jumbo Interactive is an $835 million online lottery ticket seller and the operator of the Oz Lotteries website. From this popular website, the company resells tickets on behalf of gambling giant Tabcorp Holdings Limited (ASX: TAH). These two companies have worked together for many years and recently signed a new long term reseller agreement.

I believe this long term agreement gives the company a lot of stability with its future earnings and will allow it to focus on growing its Powered by Jumbo SaaS business. I’m confident this business will be the key driver of growth in the future given its massive market opportunity. Management notes that it has a US$303 billion global total addressable market, with only 7% of this market online at the moment.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia has recommended Jumbo Interactive 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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