In my opinion, the Pushpay Holdings Ltd (ASX: PPH) share price would be a good buy after its HY21 result and the decline yesterday.
What happened yesterday?
The Pushpay share price fell hard yesterday, dropping around 13%, after reporting its HY21 result to the market. I thought the electronic donation business reported a solid set of numbers.
Pushpay reported that for the six months to 30 September 2020, its operating revenue increased by 53% to US$85.6 million and total revenue rose 51% to US$86.6 million.
Total processing volume went up 48% to US$3.2 billion. It’s expecting more volume as it wins more churches and more people adopt Pushpay’s technology.
The gross profit margin improved from 65% to 68%. As a percentage of operating revenue, the EBITDAF margin (click here to learn what EBITDA means – the F stands for foreign currency) grew from 17% to 31%. Pushpay reported that its EBITDAF grew by 177% to US$26.7 million.
Net profit before tax grew 121% to US$18.8 million and net profit after tax (NPAT) went up by 107% to US$13.4 million. The NPAT margin improved from 12% to 16%. Operating cashflow went up by 203% to US$27 million.
Pushpay also increased its EBITDAF guidance again. The new guidance is for full-year EBITDAF to be between US$54 million to US$58 million, up from US$50 million to US$54 million.
I think the Pushpay share price is a buy
There are few ASX shares that I’ve seen that look as scalable as Pushpay. The 14 percentage point increase of the EBITDAF margin was an incredible increase in just one year.
The exciting thing is that its annualised revenue is still a long way below its US$1 billion annual revenue goal. Its margins could be a lot higher by the time it reaches a third of the way there (US$333 million) or halfway (US$500 million).
EBITDAF guidance continues to be increased every few months. It’s a good sign that Pushpay’s management are remaining cautious with their guidance, or it’s even better if growth continues to outperform their own expectations.
I also like that Pushpay’s revenue could actually be pretty defensive considering people usually make regular donations to their church.
At the current Pushpay share price of $7.81, it’s priced at 37 times the estimated earnings for the 2021 financial year. Considering where other tech ASX growth shares are valued, I think Pushpay is a really compelling pick today.
