The Pushpay Holdings Ltd (ASX: PPH) share price might be good to consider for the long-term based on a few different factors.
About Pushpay
Pushpay is a business that specialises in processing digital donations and church management software.
It also recently acquired a business called Resi Media which has a high-quality video streaming service with high margins.
I think Pushpay could be one of the most promising small-but-sizeable businesses around for these reasons:
Increasing diversification of earnings
I think Pushpay’s core operations are attractive. The world’s payments are steadily going digital. Whilst the COVID-19 pandemic certainly accelerated the adoption of Pushpay, I don’t think that trend is going to reverse as economies open up.
But Pushpay has added a number of earnings growth avenues in recent years.
There’s the Church Community Builder acquisition which added more tools for Pushpay to assist the management of churches and connection with congregations. A combined product called ChurchStaq was released, offering an all-in-one option, which is resonating with churches.
The Resi Media acquisition expanded Pushpay’s abilities and cemented its market position.
Now Pushpay is looking to grow in the Catholic segment of the US faith sector, which expands its addressable market.
Over the longer-term, Pushpay is thinking about expanding internationally and also into non-religious donation areas.
Operating leverage
One of the main ways that businesses can deliver outperformance is by achieving rising profit margins.
When a business can increase the margins, its net profit can grow at a much quicker rate than revenue. And don’t forget, it’s the profit (or cashflow) that investors typically value a business on. It’s one of the main reasons why I think the Pushpay share price could be a good contender.
Pushpay is demonstrating a lot of pleasing profit growth ability.
In FY21 alone it saw the gross profit margin rise from 65% to 68%.
Pushpay’s profit soared in FY21. The FY21 operating revenue climbed 40%, but the net profit jumped 95% to US$31.2 million and the operating cashflow soared 145% to US$57.6 million.
With Pushpay already making good profit, it can use that money to invest for growth or make further acquisitions.
Pushpay share price value
Considering how much growth Pushpay is creating, I think that Pushpay shares are valued very nicely to think about. At the current share price, it’s currently valued at 35x FY22’s estimated earnings.
I think the company has many years of double digit profit growth ahead of it.
