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3 great ASX tech shares that might be good buys

ASX tech shares like Xero could be good options to consider.
The post 3 great ASX tech shares that might be good buys appeared first on The Motley Fool Australia. –

ASX tech shares could be a smart place to look for opportunities. There are some great businesses that might be quality ideas to own for the coming years.

Technology businesses are often the ones introducing new services into our lives and typically have good gross profit margins as well.

Xero Limited (ASX: XRO)

Xero is a leading cloud accounting business which offers subscribers a wide array of time-saving tools and easy-to-understand reporting. A key advantage of the offering is that users can access it anywhere on any device.

The ASX tech share continues to see its subscriber base grow in both size and diversity. In FY21 the total number of Xero subscribers increased by 20% to 2.74 million. Subscribers are becoming increasingly valuable as the average subscriber sticks around for longer – Xero’s total lifetime value of subscribers went up 38% to $7.65 billion in FY21.

Xero has a very strong market position in New Zealand and Australia. But it’s also growing quickly in other locations. In FY21, UK subscribers increased 17% to 720,000, North American subscribers rose 18% to 285,000 and ‘rest of the world’ subscribers grew 40% to 175,000.

The business has a very high gross profit margin. In FY21 it had increased to 86%, up from 85.2%.

But Xero’s net profit isn’t soaring yet – it’s still heavily investing for long-term growth because it sees a lot of opportunities around the world in the business and accounting software space.

Betashares Nasdaq 100 ETF (ASX: NDQ)

This is a leading ASX tech share that is actually an exchange-traded fund (ETF) which invests in 100 of the biggest non-financial businesses on the NASDAQ. That’s a stock exchange in the US where most of the West’s biggest tech companies are listed.

For an annual management fee of just 0.48% per annum, investors get a lot of exposure to names like Apple, Microsoft, Amazon.com, Alphabet, Facebook, Tesla, Nvidia, PayPal and Adobe. These are some of the strongest technology businesses in the world.

A large proportion of the ETF is invested in tech and tech-like investments, but there are some other businesses in there for a bit of diversification such as Costco, PepsiCo and Moderna.

Past performance is not an indicator of future performance. But, since inception in May 2015, it has returned an average of 22.5% per annum.

MNF Group Ltd (ASX: MNF)

MNF offers a number of different services for clients. It enables providers to deliver their services using phone or mobile numbers that are local to their customers. MNF’s product suite includes a range of resale-ready white-label services that communication providers can rebrand and sell.

It enables companies like Zoom, Google and Twilio to launch and scale communication services.

The FY21 half-year result saw a large amount of growth for the business. HY21 recurring revenue increased 15% to $55.7 million, earnings before interest, tax, depreciation and amortisation (EBITDA) rose 16% to $19.6 million, underlying net profit rose 30% to $8.4 million and earnings per share (EPS) jumped 62% to 7.83 cents.

The ASX tech share is expecting its EBITDA to be within the top half of its EBITDA guidance of $40 million to $43 million.

According to Commsec, the MNF share price is valued at 23x FY22’s estimated earnings.

The post 3 great ASX tech shares that might be good buys appeared first on The Motley Fool Australia.

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Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and MNF Group wasn’t one of them.

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More reading

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ASX 200 midday update: Energy shares drop, Resolute jumps, Xero higher

Xero (ASX:XRO) share price rises on app store news and broker note

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended BETANASDAQ ETF UNITS, MNF Group Limited, and Xero. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS, MNF Group Limited, and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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