The Appen Ltd (ASX: APX) share price is up 18% this morning after the technology business reported its full year result to 31 December 2018.
Appen provides data for machine learning and artificial intelligence. Basically, it provides and improves data for the development of artificial intelligence and machine learning products. With more than 20 years of experience in over 130 countries, Appen has firmly established itself as a global leader in this space.
Why The Appen Share Price Shot Up 18%
Appen reported that revenue grew by 119% to $364.3 million. Underlying EBITDA grew by 153% to $71.3 million and statutory EBITDA increased by 206% to $68.1 million (click here to learn what EBITDA means). Pleasingly, the underlying EBITDA margin improved from 16.9% to 19.6%.
Appen said that the Content Relevance division, including Leapforce, continues to be the growth engine of the company, although Language Resources also had a strong record result but margins were down.
Underlying net profit grew by 148% to $49 million and statutory net profit increased by 192% to $41.7 million. According to Bell Potter, analysts were expecting a profit of $41.1 million. Appen also boasted of strong cash conversion, being 92% of underlying EBITDA.
The Leapforce integration is nearly complete and Appen has achieved efficiency savings of $6 million in 2019 at Leapforce, which will be re-invested in engineering.
Appen Dividend
The Appen Board decided to declare a full year dividend of 8 cents per share, which is an increase of 33% compared to 2017.
Appen Management Comments
Appen CEO Mark Brayan said: “The inclusion of Leapforce, customer expansion and economies of scale have all contributed to growth and margin expansion.”
Appen Chairman Chris Vonwiller said: “This pleasing result is built upon strong execution of a well-developed strategy. We operate in an exciting sector with excellent further growth potential. The achievements have only been possible through the commendable and sustainable efforts of our global staff.”
Is Appen a buy?
Appen said that the AI market is booming. According to Appen, analysts are forecasting of market of between $169 billion to $191 billion by 2025. The McKinsey Global Institute estimates that up to 10% of the cost of AI is labelled data, putting Appen’s addressable market at up to $19 billion by 2025.
It’s true that Appen is growing at a very fast pace, the company is predicting underlying EBITDA to grow to $85 million to $90 million this year. Appen is valued at more than 57 times FY18’s earnings after today’s rise, so it isn’t cheap. But, it does look cheaper compared to some of its technology peers. However, there could be better options out there.
2 ASX Growth Shares Better Value Than Appen
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