The 3 exciting ASX shares in this article could be worth watching including Altium Limited (ASX:ALU) and Redbubble Ltd (ASX:RBL).
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The three ASX tech shares in this article may be exciting to some investors and could be worth watching:
Altium Limited (ASX: ALU)
According to the ASX, Altium has a market capitalisation of $4.4 billion.
Altium is an electronic PCB software design business that is one of the leading players across the world. Jason Kururangi of Aberdeen Standard Investments recently said that Altium was a buy as a long term investment.
Altium has a few leading offerings in its portfolio including Altium Designer and Octopart.
The company is aiming for market domination of its industry by 2025 with a goal of 100,000 Altium Designer seats. It wants to win over the industry like Microsoft did with office software. Altium is hoping to reach US$500 million of revenue by 2025 (or perhaps 2026 because of COVID-19 impacts).
COVID-19 hurt growth in FY20 as it found it harder to win new customers during the final quarter. This led to price discounts and longer payment terms. However, it still managed to grow normalised earnings per share (EPS) by 5%.
In FY21, before the sale of the TASKING business, the ASX tech share was expecting to grow revenue by 6% to 12% to US$200 million to US$212 million with an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of between 38% to 42%.
The company is looking to shift the business towards the cloud with its Altium 365 product.
According to Commsec projections, Altium is trading at 44x FY23’s estimated earnings.
Temple & Webster Group Ltd (ASX: TPW)
According to the ASX, Temple & Webster has a market capitalisation of $1.1 billion.
This ASX tech share is a growing e-commerce player that sells a wide range of furniture and homewares.
FY20 was a year of strong growth for the company. Many shoppers had to go online for their products with plenty of physical retail stores shut for some period of time during 2020.
Over FY20, it reported revenue growth of 74% to $176.3 million. Revenue grew 94% in the second half of FY20 and 130% in the fourth quarter. It also grew its EBITDA by 483% to $8.5 million. The ‘adjusted EBITDA’ margin improved from 2.5% to 5.3%.
Management were pleased to generate such strong growth whilst keeping a high level of customer satisfaction. Active customers grew 77% year on year.
The growth has continued into FY21. Between 1 July to 19 October, the ASX tech share had delivered revenue growth of 138% and it had generated $8.6 million of EBITDA in the first quarter of FY21.
The contribution margin was ahead of its 15% target and customer satisfaction remained at record levels with a net promoter score of around 70%.
Temple & Webster said that it’s committed to a high growth strategy to take advantage of the structural shift towards online shopping.
According to the Commsec, Temple & Webster is valued at 34x FY22’s estimated earnings.
Redbubble Ltd (ASX: RBL)
According to the ASX, Redbubble has a market capitalisation of $1.7 billion.
Redbubble is an online marketplace business that sells a wide variety of artist-produced products like wall art, clothes, phone cases and masks.
In FY20 Redbubble grew its marketplace revenue by 36% to $349 million. Gross profit went up 42% to $134 million and operating EBITDA surged 141% to $15.3 million. It generated $38 million of total free cashflow in FY20. During the locked-down fourth quarter of FY21, the ASX tech share’s marketplace revenue grew 73%, gross profit rose 88% and it made $8.4 million of operating EBITDA.
At the time of the FY20 result, Redbubble Martin Hosking said: “RB Group’s on-demand fulfilment model and differentiated consumer offerings provide us with distinctive advantages. The strong financial performance follows from these fundamentals. It has been pleasing to see the acceleration of existing trends in the last few months. 2021 represents a year of opportunity for the business. We are positioned to build on a decade of momentum and aggressively pursue the global opportunity presented by the shift to online activity and increasing adoption of e-commerce platforms.”
Redbubble’s growth also continued into the first quarter of FY21 – marketplace revenue was up 116% to $147.5 million, gross profit grew 149% to $64.5 million, it made $22.1 million of earnings before interest and tax (EBIT) and Redbubble generated $27.1 million of operating cashflow.
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Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.