3 reasons why the Pushpay (ASX:PPH) share price might be a buy

The Pushpay Holdings Ltd (ASX:PPH) share price could be worth looking at for a number of different reasons, including operating leverage.
The post 3 reasons why the Pushpay (ASX:PPH) share price might be a buy appeared first on The Motley Fool Australia. –

There are a few really good reasons why the Pushpay Holdings Ltd (ASX: PPH) share price could be worth looking at.

Pushpay is a payments and technology business. It provides electronic donation capabilities for large and medium US churches. Pushpay also provides number of church management and community tools.

Some of those tools include kids and volunteer pre-check, group participation, events, custom content and branding, sermons and audio player, push notifications, app giving and transaction history, giving analytics. It also has a livestreaming option.

Pushpay can claim multiple benefits for the church – increased participation, the ability to engage with new donors, increase recurring giving and removing barriers to generosity.

There are many reasons why the Pushpay share price might be worth owning, including these three:

Strong top line growth

ASX shares that are growing revenue at a double digit pace give themselves a better chance of producing shareholder returns.

Pushpay is seeing a number of positive growth numbers that help revenue. Over FY21, its total customers increased by 2% to 11,099. Average revenue per customer (ARPC) per month grew 12% to US$1,475. Total processing volume in FY21 rose 39% to US$6.9 billion.

All of these different measures helped operating revenue rise by 40% to US$179.1 million.

Over the long-term, Pushpay is aiming to grow its annual revenue to US$1 billion. That would represent a market share of around 50%.

One of the main ways that Pushpay is attracting so much demand for its software is Churchstaq. That’s the offering of Pushpay tools, combined with all of the tools offered by Church Community Builder.

Pushpay quoted a client from the Emmanuel Christan Centre who said that the functionality of the Pushpay tool is the best he has ever experienced.

The annual revenue retention rate is more than 100% – customers appear to be loyal and sticky.

Operating leverage

Not only is Pushpay seeing strong growth of revenue, but it’s also experiencing profit growth at a much faster pace.

As margins grow, it means that net profit can rise at a faster pace than revenue. Net profit is one of the key factors that investors look at when deciding what the Pushpay share price should be.

During FY21, Pushpay’s gross profit margin increased by three percentage points from 65% to 68%. This helped net profit after tax increase by 95% to US$31.2 million and operating cashflow grow by 145% to US$57.6 million.

Pushpay said that it’s going to continue to balance expanding its operating margins with opportunities to increase revenue growth.

Investing for the future

Pushpay is growing within its core customer base, but it’s also going to invest for growth.

In FY22 it plans to invest US$6 million to US$8 million to establish relationships and increase engagement with key stakeholders in the Catholic segment. Two thirds of that money will be spent on product design and development. The rest will be spent on sales and marketing.

Management expect to see the benefits of this expenditure over the course of the following financial years.

Pushpay said that it’s the “first step” in investing to grow outside of its existing core customer base. It has set a goal of winning more than 25% of the Catholic church management system and donor management system market over the next five years.

The ASX share pointed out that the Catholic church is closely associated with many education providers and non-profit organisations, which presents further opportunities within the US and other international jurisdictions.

It continues to look for acquisition opportunities to bolster its growth prospects.

Pushpay share price valuation

According to Commsec, the Pushpay share price is currently valued at 24x FY23’s estimated earnings per share (EPS).

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.

*Returns as of February 15th 2021

More reading

Got cash to invest? Here are 2 ASX shares to buy

3 exciting ASX growth shares rated as buys

Why is the Pushpay (ASX:PPH) share price down 13% this year?
2 fantastic ASX shares with enormous growth potential

ASX 200 drops again, Pushpay rises, CSR climbs

The post 3 reasons why the Pushpay (ASX:PPH) share price might be a buy 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!