So far in 2016 the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has fought hard to carve out a solid 3.5% gain. Considering the Brexit and the meltdown in the markets at the start of the year this is quite an achievement from the index.
But compared to one exciting tech share the S&P/ASX 200's 3.5% gain is nothing short of trivial. That tech share is language and voice recognition services provider Appen Ltd (ASX: APX). Year to date its share price has gone absolutely gangbusters and provided its shareholders with a return of around 94%.
But despite these strong gains already this year I still feel there is a great long-term investment opportunity here.
One of the first things I like to point out about Appen is its incredibly strong balance sheet. Unlike many tech shares that list on the ASX, Appen is already profitable and has zero debt on its balance sheet.
The next thing that draws me to the company is its clientele. One of its major customers is Microsoft. It uses Appen's services for a number of its products including Skype and its search engine Bing. Pleasingly the company announced earlier this month that it had successfully renewed a number of contracts with the US tech giant.
It advised that the contracts cover a range of Appen products and services designed to improve the interaction between computers and humans. Management explained that "by providing critical enhanced data to machine learning algorithms, Appen helps tune these computer applications to process and understand natural language and relevance as well as humans."
As well as Microsoft, it is believed that fellow US tech giant Facebook is also a client. In April the company announced that it has been awarded a new contract to provide enhanced data services to the world's largest global photo sharing platform. Although it didn't release the name of the company, the world's largest global photo sharing platform is Facebook's Instagram.
In my opinion the fact that Appen's technology is attracting companies of this stature, demonstrates just what an exciting future this growing Australian company has. It therefore comes as little surprise to see its share price rally over 94% so far in 2016 as investors fight to get their hands on its shares.
As the world becomes increasingly globalised, the need for companies to personalise services for their customers is becoming evermore important. I believe Appen is positioned to profit from this and would make for an excellent long-term investment.
At 34x trailing earnings its shares may look a little on the expensive side. But compared to other exciting ASX tech shares like Aconex Ltd (ASX: ACX) and XERO FPO NZX (ASX: XRO), I believe it is great value considering its strong growth prospects.
