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It was a busy week for ASX share reporting. There were a number of interesting reports and there were a few that really caught my eye:

A2 Milk Company Ltd (ASX: A2M)

I really like see a business performing well. I think it’s kind of inspiring to see an ASX share do very well, particularly when it involves growing well on the global stage.

A2 Milk is one of those businesses that has performed exceptionally well for an extended period of time. It reported another excellent set of numbers in FY20.

If you didn’t read the full result, I’ll give you some of my highlights from it.

Total revenue increased by 32.8% to NZ$1.73 billion. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 32.9% to NZ$549.7 million.

Net profit after tax (NPAT) rose by 34.1% to NZ$385.8 million with operating cash flow of NZ$427.4 million.

The business finished with a closing cash balance of NZ$854.2 million. Quite a bit of that cash is seemingly going to be used to acquire a controlling stake of Mataura Valley Milk. It’s looking to acquire 75.1% of it for NZ$270 million.

Infant nutrition revenue rose by 33.8% to NZ$1.42 billion. Chinese label infant nutrition sales more than doubled to NZ$337.7 million. A2 Milk is growing strongly in the US with revenue growth of 91.2% to NZ$66.1 million. Distribution has now reached 20,300 stores, up from 17,500 stores at the end of December 2019.

I think A2 Milk could be one of the best ASX share mid-caps to own over the next five years.

JB Hi-Fi Limited (ASX: JBH)

When I think about which ASX blue chip is nailing it right now, it has to be JB Hi-Fi. The business has continually surprised and impressed me over the past five years. The FY20 result was no different. In the middle of a global pandemic and a recession, you wouldn’t think JB Hi-Fi would be one of the ASX shares that would do really well.

But it has done very well.

Total sales grew by 11.6% to $7.9 billion. Underlying earnings before interest and tax (EBIT) rose by 30.5% to $486.5 million. Underlying net profit after tax (NPAT) rose by 33.2% to $332.7 million and underlying earnings per share (EPS) increased by 33.2% to 289.6 cents. Statutory net profit rose 21% to $302.3 million.

JB Hi-Fi’s board decided to increase the final dividend by 76.5% to 90 cents per share. That brought the total FY20 dividend up to 189 cents, an increase of 33.1%.

I like that the ASX share rewarded its employees with $1,000 given to full-time employees (and pro-rated for part-timers and casuals).

The July 2020 sales update was also really strong. For the month, total sales growth was 42.1% for JB Hi-Fi Australia, 9.1% for JB Hi-Fi New Zealand and 40.4% for The Good Guys. At the time of the result, August sales were also “strong”.

Redbubble Ltd (ASX: RBL)

Independent artist marketplace business Redbubble also really impressed with its result this week.

Marketplace revenue increased by 36% to $349 million. Gross profit increased by 42% to $134 million.

Operating EBITDA, which excludes non-cash share-based payments, currency, lease accounting changes, depreciation and amortisation, went up 141% to $15.3 million. EBITDA went up 358% to $5.1 million.

The ASX share reported that it generated free cash flow of $38 million in FY20.

In the fourth quarter of FY20 Redbubble reported revenue growth of 73% to $103 million. Gross profit rose by 88%. In the last quarter of FY20 it made $8.4 million of operating EBITDA and $7.4 million of EBITDA.

In FY21, July marketplace revenue grew by 132% and a similar sales level in the first two weeks of August.

Foolish takeaway

All three of these ASX shares reported strong growth despite the difficult conditions. I’m not sure I’d buy JB Hi-Fi shares because I’m not sure how long this type of performance can last – but I’ve been wrong before! However, A2 Milk and Redbubble both still look like buys to me for the long-term.

More reading

• Is the A2 Milk share price still a good buy after strong full year results?
• The ASX 200 fell 0.1% today, Suncorp shines
• ASX 200 flat: Suncorp surges higher, A2 Milk acquisition plans, TPG’s half year update
• Why a2 Milk, Coca-Cola Amatil, Star, & Suncorp shares are charging higher
• Meet the latest ASX stock that’s more than doubled its full year COVID-19 earnings

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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 3 ASX share reports I loved this week appeared first on Motley Fool Australia.

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How much money can you actually make from investing in ASX shares? It’s a question many potential investors want to know – and fair enough too. Investing requires you to invest your own precious capital, the fruits of your labour. Because of the volatile nature of the share market, this can be very difficult. It’s never much fun to wake up and see the $2,000 you’ve invested is now worth $1,800.

So, here’s how I like to think of it. Investing is a long-term game. If you think it’s all about finding that one rocket share that will turn your $2,000 into $3,000, $4,000 or $10,000 by next week, I would recommend hitting the casino instead. That way, you’ve got similar odds but no brokerage to worry about.

In all seriousness, one of the biggest misconceptions that I hear about the share market is that it’s no different from gambling. But a long-term strategy couldn’t be any further from a game of blackjack.

ASX shares and compound interest

Put simply, successful investing is about harnessing the power of compound interest. That’s interest earning interest earning interest. It’s what Einstein supposedly called the ‘eighth wonder of the world’. The benefits of compound interest are hard to see initially, but overwhelmingly obvious (and FOMO-inducing) before too long.

Let’s illustrate. If a portfolio earns a return of 10% per annum, it will roughly double in value every 7 or so years (going by the rule of 72). Now a double is a double, no matter the value of what you are doubling. Going from $1,000 to $2,000 over 7 years doesn’t sound too exciting. But going from $100,000 to $200,000? Starting to get somewhere.

What about $200,000 to $400,000? Or $400,000 to $800,000? Once you start going from $800,000 to $1,6 million, and then $3.2 million, you can start to appreciate the awesome power of compound interest. Legendary investor Warren Buffett wasn’t a billionaire until he was more than 50 years’ old. Today (40 years’ later), the man is worth roughly US$79 billion. That’s compounding at work for you.

So when you’re thinking about how much money you can potentially make from ASX shares, it’s all about the rate of return you can receive. If you manage 10% per annum on average, your portfolio can be expected to double in size every 7 years. If you make 12%, it will double every 6 years. 15%? Every 4.8 years.

So how can you manage returns like these? Well, it’s not as hard as you might think. Simple passively managed exchange-traded funds (ETFs) will always give you the performance of the share market as a whole. The Vanguard Australian Shares Index ETF (ASX: VAS) simply holds the largest 300 companies on the ASX, all in one fund. Since it’s inception in 2009, holding this one investment would have returned you an average of 8.18% per annum.

Over the past 10 years, the United States markets have done even better. Holding an S&P 500 index fund (tracking the largest 500 companies in the US) like the iShares S&P 500 ETF (ASX: IVV) has returned an average of 16.38% per annum over the last 10 years. These numbers don’t indicate that these returns will continue forever. But it’s a good place to start in my view.

Foolish takeaway

Of course, outperforming these market-tracking ETFs can be difficult. But we Fools think anyone with the right mindset and dedication can do it. So if you’re wondering how much money you can make from investing in ASX shares, the sky is the limit. But the earlier you start, the more time you have for compounding to ‘do its thing’. So what are you waiting for?

More reading

• 2 ASX ETFs I would buy for growth and income
• Is now a good time to buy Magellan shares?
• 3 tips for beginners investing in ASX shares
• 2 ASX shares I would buy for growth and income
• Is the Vanguard Australian Share ETF the best long-term ASX investment?

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

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The S&P/ASX 200 Index (ASX: XJO) ended its winning streak last week with a small decline. The benchmark index recorded a 0.2% weekly decline to end the period at 6,111.2 points.

Four shares that didn’t let that hold them back are listed below. Here’s why they were the best performers on the ASX 200 last week:

WiseTech Global Ltd (ASX: WTC)

The WiseTech Global share price was the best performer on the ASX 200 last week with a 40% gain. Investors were fighting to buy the logistics solutions company’s shares after it overcame COVID-19 headwinds to deliver a strong full year result for FY 2020. WiseTech Global recorded a 23% increase in revenue and a 17% lift in EBITDA. Looking ahead, management provided very positive guidance for FY 2021. It expects its EBITDA to increase between 22% and 42%.

IDP Education Ltd (ASX: IEL)

The IDP Education share price wasn’t that far behind with a 31.6% gain over the period. The catalyst for this was the student placement and language testing company’s strong full year result. Despite the pandemic, IDP Education posted a 2% decline in revenue to $587.1 million and an impressive 29% increase in EBITDA to $148.6 million. The latter was driven by excellent cost control.

Monadelphous Group Limited (ASX: MND)

The Monadelphous share price was on form and charged 29.3% higher last week. This appears to have been driven by a bullish broker note following its full year results. Analysts at Macquarie upgraded the engineering company’s shares to an outperform rating with an increased price target of $11.57.

Corporate Travel Management Ltd (ASX: CTD)

The Corporate Travel Management share price was a strong performer last week with a gain of 20.9%. Investors were buying the corporate travel specialist’s shares following the release of its full year results. Although the company reported a loss of $8.2 million, a better than expected performance in July got investors excited. Corporate Travel Management revealed that its bookings in July were greater than in June. It feels this suggests a broad-based recovery in corporate travel activity is underway.

More reading

• These were the worst performing ASX 200 shares last week
• WiseTech and 2 more ASX shares outperforming this earnings season
• The ASX 200 fell 0.1% today, Suncorp shines
• Where to now for the NIB share price?
• Why the Corporate Travel share price is up 57% in August

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 Idp Education Pty Ltd and WiseTech Global. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management 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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If you’re in the very fortunate position of having $100,000 in a savings account and have no immediate use for it, I would suggest you consider putting it to work in the share market.

Especially given how most major banks are offering savers base interest rates of just 0.05% with their savings accounts at present.

This means that even with $100,000 in one of these saving accounts, you would only gain an incredibly pitiful $500 of interest each year.

Why the share market?

The Australian share market has generated an average return of 9.2% per annum over the last 30 years.

If the market were to do the same over the next 12 months, an investment of $100,000 would generate a return of $9,200 on your investment. That’s a difference of $8,700.

But why stop there? If you’re able to keep these funds invested for longer, they could potentially grow notably larger.

For example, a $100,000 investment earning 9.2% per annum for 10 years would be worth $241,000 at the end of the period.

Keep these funds invested for 20 years and it’ll be worth $580,000 if you average that same return each year.

But where should you invest these funds?

I think the three ASX shares listed below would be great options for these funds and could even provide stronger than average returns for investors.

Altium Limited (ASX: ALU)

Altium is an electronic design software provider. I believe it could be one of the best buy and hold options on the ASX due to the Internet of Things and artificial intelligence booms. These markets are underpinning the proliferation of electronic devices globally and supporting strong demand for its award-winning software.

Appen Ltd (ASX: APX)

Another option to consider is Appen. It is a leading developer of high-quality, human annotated datasets for the machine learning and artificial intelligence markets. Thanks to the strong growth of these markets and its leadership position, I believe Appen is well-placed to deliver strong growth over the next decade.

ResMed Inc. (ASX: RMD)

Another top ASX share to consider investing these funds into is ResMed. It is a medical device company which is focused on the sleep treatment market. I believe the company is well-positioned to deliver strong long-term earnings growth thanks to its industry-leading products and significant market opportunity.

More reading

• Where to invest your Commonwealth Bank dividends in September
• 3 stellar ASX growth shares to buy in FY 2021
• Top brokers name 3 ASX 200 shares to buy today
• Is the Altium share price a buy?
• The Appen share price just soared to an all-time high. Is it a buy?

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 Altium. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended ResMed Inc. 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 Where to invest $100,000 into ASX shares right now appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) was out of form last week and recorded a small decline. The benchmark index ended the week 0.2% lower than where it started it at 6,111.2 points.

Four shares that fell more than most are listed below. Here’s why they were the worst performers on the ASX 200 last week:

Treasury Wine Estates Ltd (ASX: TWE)

The Treasury Wine Estates share price was the worst performer on the ASX 200 last week with a 22.8% decline. Investors were selling the wine company’s shares amid news that the Chinese Ministry of Commerce has initiated an anti-dumping investigation into Australian wine exports into China. In response to this, there is speculation China is preparing to levy hefty import duties on Australian wine exports.

Unibail-Rodamco-Westfield (ASX: URW)

The Unibail-Rodamco-Westfield share price was some way behind as the next worst performer with a 12.9% decline. This appears to have been driven by speculation the shopping centre operator is going to launch a major rights issue in the near future to see it through the crisis.

Cooper Energy Ltd (ASX: COE)

The Cooper Energy share price was out of form and dropped 10% lower. Last week APA Group (ASX: APA) announced that it would temporarily shut down its Orbost gas processing plant so it can be brought up to full operating capacity. The gas pipeline company is doing this under a revenue and cost-sharing deal with Cooper Energy. Investors didn’t appear pleased with the agreement.

Resolute Mining Limited (ASX: RSG)

The Resolute Mining share price wasn’t far behind with a 9.9% decline. Investors selling the gold miner’s shares amid news that Mali’s President Ibrahim Boubacar Keïta resigned after being detained by mutinying soldiers. Resolute’s key Syama gold operation is based in the country. During the June quarter the Syama operation contributed 63,705 ounces of gold production. This represents 59.4% of its total production of 107,183 ounces during the quarter.

More reading

• These were the best performing ASX 200 shares last week
• The ASX 200 fell 0.1% today, Suncorp shines
• Where to now for the NIB share price?
• ASX 200 flat: Suncorp surges higher, A2 Milk acquisition plans, TPG’s half year update
• Meet the latest ASX stock that’s more than doubled its full year COVID-19 earnings

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates 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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It’s been a funny week for the A2 Milk Company Ltd (ASX: A2M) share price.

After opening the week at a near record high of $19.52, the A2 Milk share price dropped almost 7% in the following days. This was after the company announced a record profit of NZ$385.8 million, a 34% increase.

So, what happened?

There is no doubt that A2 Milk has had an absolute stellar 2020 financial year. The company received a positive bump in earnings from the COVID-19 pandemic as people rushed to buy groceries and milk powder. At the same time, A2 Milk seized the opportunity to boost its shareholding in supplier Synlait Milk Ltd (ASX: SM1) to 19.8%.

And to cap it all off A2 Milk Company was included as a member of the S&P/ASX50 Index (ASX: XFL).

However the outlook provided by A2 Milk for FY21, and expectations of slower revenue growth going forward, has caused at least one broker to turn sour on the company and suggest shares are a ‘sell’. I disagree.

There’s still a lot to like about A2 Milk

Firstly, although growth may slow in the coming year, it certainly won’t stop. The company’s guidance for the 2021 financial year said it expected “continued strong revenue growth support by our regions”. This will be driven by investing more into marketing and continuing to increase market share.

Secondly, I think the A2 Milk brand is building a valuable intangible asset moat that adds significant long-term value for investors.  Having a trusted, health focused brand differentiates A2 Milk and lets the product command a premium price for what would otherwise be a commodity product.

Finally, if the company can continue to grow revenue and maintain strong margins, it stands to become a cash-generating monster in the coming years.

For the 2020 financial year, A2 Milk reported a huge return on equity (ROE) of 34%. To put this into context, data compiled by valuation guru and New York University professor Aswath Damodaran suggested the average ROE for the food processing industry was 7.9% in 2019. With no debt and minimal capital expenditure requirements, this cash can be ploughed back into growth or returned to investors.

Should you buy A2 Milk shares?

I think it’s one of the best quality companies to own today, and the A2 Milk share price is reasonable relative to its prospects for growth over the next 5 to 10 years.

I’ve made the mistake before of thinking shares in quality, growing companies looked expensive, only to watch them flourish – hello Fisher & Paykel Healthcare Corp Ltd! (ASX: FPH).

I see the A2 Milk share price in that light today. A high margin, growing business with significant potential to continue compounding returns over the coming years.

More reading

• The ASX 200 fell 0.1% today, Suncorp shines
• ASX 200 flat: Suncorp surges higher, A2 Milk acquisition plans, TPG’s half year update
• Why a2 Milk, Coca-Cola Amatil, Star, & Suncorp shares are charging higher
• a2 Milk share price on watch after announcing Mataura Valley Milk acquisition plans
• Where to invest $10,000 into ASX shares immediately

Motley Fool contributor Regan Pearson owns shares of A2 Milk. You can follow him on Twitter @Regan_Invests. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Is the A2 Milk share price still a good buy after strong full year results? appeared first on Motley Fool Australia.

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I’ve got my eye on Wesfarmers Ltd (ASX: WES) shares right now. The Wesfarmers share price is up 17.6% this year but I think it could climb further.

Why I like the Wesfarmers share price right now

One big reason I like Wesfarmers is its large-cap status. The Wesfarmers market capitalisation is $55.3 billion which makes it a heavy hitter within the S&P/ASX 200 Index (ASX: XJO).

Given the uncertainty we’re seeing right now, I like the safety of large companies like Wesfarmers.

It’s not just the sheer size of the company but also its earnings diversification. Wesfarmers reported solid earnings contributions from across its Bunnings, Kmart, Officeworks and Catch business units.

The Wesfarmers share price edged lower on Thursday after the full-year earnings result which showed strong earnings but a cautious FY21 outlook.

I think there was a lot to like about the result including a robust balance sheet with deep cash reserves. That was evidenced in the conglomerate’s 18 cents per share special dividend following its sale of another stake in Coles Group Ltd (ASX: COL).

That cash position is another reason why I like the Wesfarmers share price right now. Under normal circumstances, I would be worried about cash being a drag on performance.

However, the coronavirus pandemic has thrown a spanner in the works. I think holding cash could be a good idea right now, especially with inflation looking unlikely to head higher.

It leaves Wesfarmers well-placed to make some acquisitions when things settle down. Given the economic conditions are likely to worsen in the medium term, that could also present some undervalued buying opportunities.

When those opportunities present themselves, Wesfarmers will be waiting with a fistful of cash to snap up a bargain. That could be good news for the Wesfarmers share price and the company’s investors.

Foolish takeaway

The Wesfarmers share price has outperformed in 2020 but I think it has further to run.

Strong earnings, a healthy cash position and tactical buying opportunities on the horizon bode well for future growth.

More reading

• 2 ASX 50 shares to buy for your retirement portfolio
• Real reason for Kmart’s empty shelves revealed
• Should you buy ASX shares before or after reporting season?
• Buy CSL and these quality ASX blue chip shares today
• ASX 200 down 0.8%, IDP Education soars

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

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WiseTech Global Ltd (ASX: WTC) shares have been surging higher after a strong full-year earnings result. The ASX tech share rocketed 34% higher on Wednesday, but it’s not the only one impressing investors this month.

Here’s why I’m a big fan of WiseTech and 2 more ASX shares as we pass the halfway point of the August earnings season.

Why I like WiseTech and 2 more ASX shares this August

Let’s start with WiseTech. WiseTech is a supply chain software provider with strong market share around the globe.

The ASX tech share rocketed higher after posting a bumper earnings result headlined by a 197% surge in net profit after tax. Revenue from recent acquisitions totalled $166.4 million, up 29% from FY19 figures.

Just as important as the FY20 result was the outlook for the year ahead. WiseTech is anticipating FY2021 revenue growth of 9-19% with earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 22–42%.

Those are some strong numbers that I think could justify WiseTech’s current 55.49 price to earnings (P/E) ratio.

It’s not just the tech sector that impressed me last week. I had my eye on the Domino’s Pizza Enterprises Ltd (ASX: DMP) share price, which was on the move.

Domino’s posted a solid FY20 result despite the coronavirus pandemic and associated uncertainty, with free cash flow up 90.6% to $161.8 million.

The ASX share hit a new record high after impressing investors with strong earnings. That was underpinned by strong same-store sales growth across Japan, Europe, Australia and New Zealand.

I think the outlook looks good for Domino’s in the near term. The business has been resilient despite several store shutdowns and other challenges around the globe.

Finally, the Corporate Travel Management Ltd (ASX: CTD) share price also caught my eye.

The ASX travel share is now up 57.85% in August despite posting an $8.2 million statutory net loss after tax. That included a better than expected earnings result in Q4 2020 to round out the year.

Clearly, there are plenty of challenges ahead for the ASX travel share. However, I’m bullish on Corporate Travel – looking at the medium term, I’d still expect the business sector to pick up before leisure numbers return.

That means the Corporate Travel share price may continue to climb higher and outperform its peers in the coming months. 

Foolish takeaway

These just a few of the ASX shares that caught my eye this week. It’s been a broad week for earnings with WiseTech, Domino’s and Corporate Travel spanning many sectors.

The August earnings season is arguably a great time to buy. Investors have a great look at company financials and management forecasts for the year ahead.

There are no guarantees when investing, but I think these 3 are shaping up as high-quality ASX shares to hold for the long-term.

More reading

• These were the best performing ASX 200 shares last week
• Why the Corporate Travel share price is up 57% in August
• Why I’d buy the Domino’s share price at an all-time high
• The latest ASX 200 stocks hit by broker downgrades
• After a 35% jump, is the WiseTech share price overvalued?

Ken Hall 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. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. 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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I think at this Pushpay Holdings Ltd (ASX: PPH) share price, it make great returns over the long-term.

I’m not saying that if you invest $500 you’ll become a millionaire. But I do believe that the Pushpay share price can produce very strong returns for investors due to a number of factors.

A quick overview of Pushpay

Pushpay describes itself as a donor management system, with donor tools, finance tools and a custom community app for the faith sector, non-profit organisations and education providers.

Currently, its biggest client base is large and medium US churches. These churches have large congregations which provide an enormous amount of donations each year. Pushpay is leveraged to this through the digital donations that it processes through its system on behalf of the churches.

Recently Pushpay acquired Church Community Builder which provides a software as a service (SaaS) church management system, largely in the US.

Church Community Builder provides a platform that churches use to connect and communicate with their community members, record member service history, track online giving and perform a range of other administrative functions.

Why I think the Pushpay price share has so much growth potential

The combined Pushpay business can offer clients a stronger combined service to customers. Each business can try to sell to the other’s client base. Plus, the combined business can make a compelling offering to potential new clients. That’s good news for earnings and the Pushpay share price. 

COVID-19 conditions have really accelerated the growth prospects for Pushpay. Social distancing and gathering restrictions led Pushpay to having a stronger FY20 than it first expected. It also helps that Pushpay offers clients a livestreaming service.

In FY20 Pushpay grew its revenue by 32% to US$129.8 million. Not only did Pushpay grow its revenue by a strong amount, its operating leverage also improved substantially. The gross margin rose from 60% to 65% over the year. As a percentage of operating revenue, total operating expenses improved from 65% to 52%.

It’s no wonder the Pushpay share price has shot up since reporting.

These are impressive improvement numbers. That improvement means that Pushpay’s additional revenue in FY21 will add much more to the bottom line than the revenue added in FY19.

Earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) rose by US$23.5 million, up from US$1.6 million to US$25.1 million.

In FY21 Pushpay is hoping and expecting to at least double its EBITDAF in FY21 to between US$50 million to US$54 million.

Longer-term growth

The Pushpay share price has doubled so far in 2020. It might be too much to expect that the company can double in size again over the next eight months – but I think it could comfortably beat the overall ASX return.

In FY20 the company generated US$130 million of revenue. Pushpay is aiming for US$1 billion from the medium and large US church sector over time. An extra US$870 million of revenue would turn Pushpay into a much bigger business. Look at how much operating leverage Pushpay was able to generate by adding just US$31 million of extra revenue.

The large and medium US church sector isn’t the only growth avenue for Pushpay. There are churches in other countries as well as other religions in the US (and globally).

Plus, Pushpay itself has acknowledged that it services not-for-profits and education – these are also extremely large donation sectors that Pushpay could grow into over time. But that’s just a bonus to the current thesis. 

Pushpay is now cashflow positive, it generated US$23.5 million of operating cashflow in FY20. This will allow Pushpay, in its own words, to “assess further potential strategic acquisitions that broaden Pushpay’s current proposition and add significant value to the current business.”

Foolish takeaway

Pushpay is currently trading at under 35x FY22’s estimated earnings. I think over the next five years Pushpay could be one of the best-performing small-to-mid cap ASX shares. I believe the Pushpay share price looks very compelling in my opinion. Even after the strong run this year.

More reading

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. 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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Clients of collapsed stockbroking firm BBY had some good news Friday after five years of not knowing whether they would get any of their money back.

The liquidator, KPMG, announced that the first interim cash distribution would be made to former customers who have claimed owed money.

There are about 6,000 former clients who are claiming a total of $64 million. They won’t receive 100% of what they’re owed but will receive a partial repayment as shown:

Product	Equities	Exchange-traded options	Pooled accounts	Interactive Brokers (online platform)
Estimated total cents in the dollar return	73	59	26	44
First/interim distribution (cents in the dollar)	63	50	22	38

BBY was a popular Australian stockbroking company that went into administration in 2015, owing its clients millions of dollars in invested monies.

Its troubles started after a botched deal in 2014 to acquire $192 million of Aquila Resources Limited (ASX: AQA) shares on behalf of a client. 

BBY was unable to meet a margin call related to that transaction, with the ASX Ltd (ASX: ASX) also getting into hot water over bending its rules to prevent a default.

Later investigations by the liquidator triggered allegations of misuse of client funds.

Tennis legend taken to court for $3.3 million

Some of the unusual practices at BBY allegedly included executive chair Glenn Rosewall’s hiring of a psychic to come up with investment strategies.

Rosewall is the son of legendary tennis player, Ken Rosewall, who was himself a director of BBY.

The liquidator is now taking the senior Rosewall to court to claw back a $3.3 million loan repayment he received from BBY.

It is alleged that payment was received when BBY was insolvent and when other creditors had not been paid out. Rosewall is “strenuously” denying the accusation.

The civil case is scheduled for the Supreme Court starting on 8 September.

Rosewall won 8 Grand Slam singles titles over the 1950s, 1960s and 1970s.

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Motley Fool contributor Tony Yoo 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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