Appen Ltd doubles it half year profit: Is it time to buy this exciting tech share?

Exciting tech company Appen Ltd (ASX: APX) has been one of the big movers in trade today. Its shares bolted higher by over 11% at the market open following the release of interim results which revealed an incredible 102% increase in half year net profit after tax to a record $5.4 million.

Although the share price has since given back much of these gains, it still sits higher by just over 5% at the time of writing.

Appen is easily one of my favourite tech shares on the ALL ORDINARIES (Index: ^AXAO) (ASX: XAO). This fledgling company is one of the market leaders in the growing language technology and machine learning market, providing high quality data critical for automatic speech recognition.

Thanks to the increasing demand for language data and services, it counts some of the world’s largest technology companies such as Facebook and Microsoft amongst its growing client list.

This strong demand led to both its Language Resources and Content Relevance segments posting increases of 41% and 54% respectively. Although it received a slight boost from favourable currency fluctuations, on a constant currency basis segment revenues still grew 34% and 45% respectively on the prior corresponding period. This took total revenue higher by 49% year on year to $53.4 million.

One key aspect that I have always liked about Appen is its robust balance sheet. Unlike many other growing tech companies such as Myob Group Ltd (ASX: MYO) and Nextdc Ltd (ASX: NXT) which have sizable debts, Appen has zero debt on its balance sheet. It also has a healthy cash balance of $13 million, up slightly from six months ago.

Management offered conservative full year guidance, stating it expects full year revenue to come in at around $100 million with earnings growth exceeding 20%. Judging by the stellar first half to the year and the growing demand for its services, I’m optimistic that the company will exceed these forecasts.

But is it a buy today? Personally I think it is a great long-term investment. Today’s result means its shares are changing hands at just under 30x trailing earnings. This puts it in line with established tech shares Carsales.Com Ltd (ASX: CAR) and SEEK Limited (ASX: SEK) and at a more than fair price considering its growth potential as far as I’m concerned.

Lastly, before making an investment in Appen I would highly recommend taking a look to see if you have either of these three wealth-destroying ASX shares in your portfolio. Now might be a great time to swap them out if you ask me.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Facebook and Microsoft. Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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