The technology sector is one of the most exciting sectors on the ASX. It's a lot easier to upscale a technology business because the software, website or network has already been developed. You don't need to make a new product for every extra one you're going to sell.
Most of the new revenue falls to the company's bottom line, allowing the company to generate higher profit margins.
Here are three technology shares worth watching:
Kogan.Com Ltd (ASX: KGN)
Kogan offers a diverse range of products including Kogan Mobile, Kogan Internet, Kogan Insurance, Kogan Travel and Kogan Retail.
It offers such a large variety of things that it can appeal to almost any consumer but it can cross-sell other sections of its business to people that don't currently use that segment.
Australia is likely to follow other western country's shopping habits, so we're probably going to buy more online and Kogan could benefit substantially from this.
It's trading exceptionally expensively at 208x FY17's earnings.
Xero Limited (ASX: XRO)
Xero is changing the bookkeeping and accounting world. It offers cloud accounting software for bookkeepers, accountants and financial advisers.
The automation and cloud capabilities are huge winners for people as it allows them to be much more efficient. It has tools like automatic reminders for people that haven't paid an invoice, which saves time and perhaps a wage.
Xero isn't yet making a net profit after tax, but it is rapidly growing revenue and has a very high gross profit margin.
MNF Group Ltd (ASX: MNF)
MNF Group owns Australia's largest voice over internet protocol (VoIP) network. This is a big cost-saver for its customers and it's generating strong organic growth in Australia and overseas.
The company estimates that it has 3% of international voice traffic, which is represented by around 7 billion voice minutes per annum.
The shift to internet communication is only going to continue and MNF is well positioned to grow in this area.
It's currently trading at 30x FY18's management's estimated earnings.
Foolish takeaway
All three shares are very exciting prospects but none of them are trading cheaply. At the current prices I'd probably go for MNF first because of its recent share price falls. Kogan is too expensive for me, but I said that at $4 so I missed out on that one.
