Year to date one of the best performing shares on the ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) has been Class Ltd (ASX: CL1).
Shareholders of this high-flying provider of self-managed super fund (SMSF) software have seen the value of their holdings more than double with a 122% gain in 2016. In fact, since listing on the Australian stock exchange at the end of December 2015 its share price has risen a whopping 182%.
This incredible rise is not too surprising considering the company recently reported that it had increased its share of the SMSF market to an impressive 19.2%, following a 49.6% year on year lift in billable portfolios.
The strong growth in billable portfolios led to a 45% jump in operating revenue to $22.6 million and a stunning 71% increase in net profit after tax to $5.83 million. Its net profit margin of 25.8% was a 400 basis point rise year on year.
When it comes to judging the success of a company's product or service I believe retention rate is key. It's great announcing increases in subscriber numbers, but if you can't retain them then you'll never grow as a business.
Clearly users are incredibly satisfied with Class and its software. In FY 2016 the company posted a retention rate of 99.8%. This high retention rate underpins the strong recurring revenue stream of the business, with annualised licence fees increasing at a rapid clip.
Although its share price has risen meteorically this year and its shares trade at a significant premium to the market, I don't believe it is too late to make a long-term buy and hold investment in the company. As far as I'm concerned there is still a lot of growth to come from this fledgling company that justifies paying over the odds for its shares.
Right now I would put Class up there with Appen Ltd (ASX: APX) and Catapult Group International Ltd (ASX: CAT) as one of the most promising tech shares on the Australian market.
