In my opinion, the Pushpay Holdings Ltd (ASX: PPH) share price looks really attractive to buy at these levels.
The digital giving business, which offers church management tools, looks like a good idea to me.
Why does the Pushpay share price look so good?
The Pushpay share price is actually down around 20% over the last five months, despite the business upgrading its guidance a few times since then – including in the FY21 interim result and again a couple of months ago.
In the half-year result the EBITDAF guidance (EBITDA explained – the F stands for foreign currency) was upgraded to US$54 million to US$58 million, up from US$50 million to US$54 million.
The recent EBITDAF upgrade was to a range of US$56 million to US$60 million.
Consistently beating guidance is an attractive feature of a business. But the market doesn’t seem to be that impressed by that feature.
Great growth
One of the main reasons that I like Pushpay so much is that it’s delivering exceptional results. The good long term shareholder returns will be delivered by strong-performing businesses.
That interim result saw total processing volume go up 48%, operating revenue grew 53%, net profit after tax (NPAT) jumped 107% to US$13.4 million and operating cashflow more than tripled to US$27 million.
Pushpay is delivering excellent operating leverage as it gets bigger. The gross profit margin improved year on year from 65% to 68%. Total operating expenses only grew by 16% compared to the prior corresponding period.
For me, I think there are multiple levers that Pushpay can pull for growth into the future, longer than the market is expecting. Smaller churches, different religions and other geographic regions are all possibilities for future growth. This could help it achieve its US$1 billion annual revenue goal.
The Pushpay share price valuation looks too good to miss
When you find a business that seems to be this economically strong, you would probably have to pay a high price for it. It’s no surprise that this year’s price / earnings ratio (P/E ratio) is pricey compared to the market.
But when you take just a couple of year’s growth into account, Pushpay shares look very reasonable to me. Using the estimates on CommSec, the Pushpay share price is valued at around 23 times the estimated earnings for the 2023 financial year.
Out of all the ASX growth shares I could invest in, the Pushpay share price is one of the ones at the top of my watchlist. Other ideas I like the look of at the moment are Redbubble Ltd (ASX: RBL) and Altium Limited (ASX: ALU).
