I’m always on the look out for quality ASX tech shares that I’d be willing to buy for the long-term.
Sometimes, high-quality tech companies can be among the best ideas because of how large their total addressable market is and/or how scalable their offering is.
It’s hard to know exactly what a good valuation is at the moment, with how low interest rates are. How long will rates stay this low?
Finding businesses with great growth potential, but still at a good value for that potential, could be the track.
Here are two ASX tech shares to think about:
Pushpay Holdings Ltd (ASX: PPH)
One of the factors that attracts me to this electronic donation and church management tech business is the level of growth it’s generating compared to its valuation.
Using the earnings estimate on CommSec, the latest Pushpay share price is priced at 30 times the estimated earnings for the 2022 financial year. Considering in FY21 that net profit grew by 95% and operating cashflow rose 145%, I think that’s a reasonable number if Pushpay can continue double digit growth.
It is certainly guiding for a good amount of operating profit growth in FY22. Excluding its Catholic investment, underlying operating profit is expected to be between US$66 million to US$71 million, up from US$58.9 million of EBITDAF in FY21 (EBITDA explained, the F stands for foreign currency).
It’s that Catholic investment that partly leads me to believe that Pushpay has a much longer growth runway than some investors believe. Management are talking about capturing a 25% market share in the Catholic US space over the next five years. There’s international potential growth in the longer-term too.
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is another ASX tech share that has plenty of growth potential in my opinion.
The company itself outlined a few months ago that the beauty and personal care market in Australia is worth $11.2 billion and is expected to grow at a compound annual growth rate of 26% to 2024. Online sales only comprise 11.4% of the total market, which is lower than other places like the US, the UK and China.
To me, this says that Adore Beauty has the ability to benefit from two strong tailwinds – the growth of e-commerce and the ongoing rise of beauty and personal care spending.
Adore Beauty sells many thousands of products and it can win further with more repeat buying by customers, new customers and new brands. The business is seeing good performance of its retention of customers gained during the COVID-19 period of 2020.
In the third quarter of FY21, Adore Beauty’s revenue grew 47%. More strong growth could occur in FY22 as the business invests for growth and also (hopefully) benefits from the tailwinds I’ve already mentioned.
But these two names aren’t the only ASX tech shares I’ve got my eyes on, there are other ASX growth shares I like as well with good potential.
