There are a number of really good ASX tech shares that Aussies can buy. I think at least two of them could be worth buying in a growth portfolio at the moment.
Technology businesses have attractive financials because their software nature usually means the gross profit margin is good and it’s easier to expand quickly.
Redbubble Ltd (ASX: RBL)
Redbubble Group owns two leading online artist marketplaces: Redbubble.com and TeePublic.com. The websites sell things like apparel, stationery, housewares, bags, wall art and so on.
This ASX tech share is in the group of e-commerce companies that saw a dramatic increase in demand after COVID-19 restrictions and lockdowns hit the world.
That growth has continued in the first quarter of FY20. It generated $147.5 million of marketplace revenue, which was an increase of 116%. It saw a 149% rise in gross profit of $64.5 million. It also made $22.1 million of EBIT (EBIT explained) and $27.1 million of operating cashflow.
However, Redbubble did disclose that within the above numbers, there was a positive adjustment as delivery times have reverted back to normal levels, excluding that marketplace revenue went up 98% to $139.3 million, gross profit rose 118% to $59.6 million and EBIT came in at $17.2 million.
Who knows how long the strong growth will last? But I believe that sales will continue to move online, following the long term trend. It’s hard to say how much Redbubble will earn in FY21. If you annualise the $17.2 million EBIT figure to $68.8 million, the multiple compared to the market cap comes to 22 times the EBIT. For a long term buy, I think that’s reasonable for a fast growth business.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is one of my highest-conviction ideas at the moment. It’s rare to find a business with fast-rising revenue, profit margins, a solid balance sheet and it seems like a good valuation.
This ASX tech share ticks all of those boxes for me. Its operating revenue increased by 53% to US$85.6 million in the first half of FY21. It grew its EBITDAF margin (EBITDA explained, the F stands for foreign currency) from 17% to 31% in that same result. I think that shows that there’s a lot more leverage growth to come over the next few years.
Pushpay recently 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.
Its operating cashflow continues to improve and it had net debt of US$25 million at 30 September 2020, down from US$50 million from 31 March 2020.
The Pushpay share price is valued at 30 times the estimated earnings for the 2022 financial year.
These aren’t the only two ASX tech shares I like the look of. EML Payments Ltd (ASX: EML) is another that could be one to monitor.
