Insights

2 quality ASX 200 tech shares to buy for May

The two S&P/ASX 200 Index (ASX:XJO) tech shares in this article are quality businesses, including Technology One Ltd (ASX:TNE).
The post 2 quality ASX 200 tech shares to buy for May appeared first on The Motley Fool Australia. –

A man is connected via his laptop or smart phone using cloud tech, indicating share price movement for ASX tech shares

There are a handful of quality S&P/ASX 200 Index (ASX: XJO) tech shares that could be worth looking at.

Businesses with good margins, large addressable markets and long-term growth plans may have the potential to make good returns:

Altium Limited (ASX: ALU)

The Altium share price is down 24% since 9 November 2020 with COVID-19 impacts continuing to hurt the electronics PCB software business.

However, a lower share price gives investors the opportunity to buy at a cheaper level for the long-term.

Despite the shorter-term issues relating to pricing and China, the ASX 200 tech share has plans to reach market domination in the coming years.

A key part of those plans is Altium 365, its cloud offering. There is strong adoption of Altium 365 as it continues to add clients. At the time of the release of the half-year result a couple of months, it had 9,300 active monthly users and 4,400 monthly active accounts.

The Altium CEO Aram Mirkazemi said:

Altium 365 is key to our future success through indirect monetisation from our CAD software tools and, in time, direct monetsation from the broader ecosystem. I am most heartened by the strong adoption of Altium 365, and with our Netflix organisational changes behind us, I am confident of a much stronger second half. Early signs are positive for this.

Over the longer-term, Altium is expecting to generate a higher earnings before interest, depreciation and amortisation (EBITDA) margin in the coming years which will help grow the bottom line. 

At the current Altium share price, it’s trading at 48x FY23’s estimated earnings.  

Technology One Ltd (ASX: TNE)

Technology One is currently rated as a buy by Morgans with a price target of $9.99.

The ASX 200 tech share is currently shifting to a software as a service (SaaS) model which should lead to higher-quality revenue as well as good margins. In FY20 its churn was below 1%.

Technology One says that its global SaaS enterprise resource planning (ERP) solution is delivering a compelling value proposition for customers, providing them any device, any time access from anywhere around the globe as well as a cost-effective way to run their enterprise.

It continues to win new, large enterprise customers from competitors. It has added 104 enterprise customers to its global SaaS ERP solution. Technology One now has 539 large scale enterprise customers, with hundreds of thousands of users. It’s the largest provider in Australia.

FY20 saw its total annual recurring revenue (ARR) hit $222 million and is set to exceed $500 million in the coming years. The ARR stands at 86% of total revenue which means the majority of revenue is locked-in at the start of the financial year which positions it well to achieve growth in FY21.

Despite all the impacts of COVID-19, Technology One achieved growth in the 12 months to 30 September 2020. Underlying profit before tax went up 13% to $86.1 million and SaaS ARR rose 32% to $134.6 million. Cashflow generation from the ASX 200 tech share increased 49% to $66.4 million.

According to Commsec, the Technology One share price is valued at 32x FY23’s estimated earnings.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 2 quality ASX 200 tech shares to buy for May appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!