ASX tech shares have really useful business models that allow them to grow quickly and/or achieve great profit margins.
I think that with all this volatility going on, there are some very compelling businesses that are worth investing in.
The businesses I’m focusing on are ones with rising profit margins, growing volumes and strong outlooks (in my opinion).
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is a leading electronic donation payments business which predominately serves larger US churches whilst also providing church management tools.
The Pushpay share price has fallen almost 30% over the last month, despite the business reporting growth in all the right areas in HY22. Pushpay’s total processing volume rise 9% to US$3.5 billion, helping operating revenue increase 9% to US$93.5 million.
Management are expecting increasing revenue growth as the business executes on its strategy, achieves increased efficiencies and gains further market share. The gross profit margin improved again from 68% to 69%, helping EBITDAFI (EBITDA explained) rise 12% and net profit which surged 43% to US$19.1 million.
Pushpay is aiming to grow its exposure to the smaller churches in the Catholic space, with a target of 25% of the market over the next few years.
The world is increasingly going digital, I believe that Pushpay has an attractive long-term future.
TechnologyOne Ltd (ASX: TNE)
TechnologyOne is one of the largest ASX tech shares around with a market cap of around $4 billion.
It offers large businesses and organisations enterprise resource planning (ERP) software globally.
TechnologyOne is currently in the process of shifting all of its clients onto its cloud software as a service (SaaS) offering.
It recently reported its FY21 result which showed a lot of progress. Profit before tax was up 19% and its SaaS annualised recurring revenue (ARR) increased 43% to $192.3 million – it’s growing rapidly. The on-premise business will end by October 2024.
Management are expecting more than $500 million of ARR by FY26.
By FY24 it expects the total business to be growing by more than 15% per year.
In FY21, the profit before tax margin increased to 31%, up from 28% in the prior year. It’s expecting this to rise to more than 35% in the coming years thanks to economies of scale.
The ASX tech share said its global SaaS ERP product is delivering a compelling value proposition for customers providing them any device, any time access from anywhere in the work. It’s also cost effective. Customers also don’t have to worry about the underlying technology.
TechnologyOne continues to grow in the local government and higher education sectors.
