The Appen Ltd (ASX: APX) share price has had another enormous run over the past week, with a gain of over 5% and is currently sitting on a price of $25.16 at the time of writing.
Appen is one of those stocks where every month you have a "Dang I should have bought last month" moment. To illustrate this, Appen is up over 13% this month alone and over 150% in the last six months!
What does Appen do?
Appen provides machine learning and artificial intelligence (AI) research and data and is a global leader in the development of human-annotated datasets. In other words, it helps machines learn from us better. This is a highly specialised, niche service that Appen provides to some of the largest companies in the world – Appen deals with Microsoft and Facebook as regular clients and possibly others such as Tesla (it's hard to know exactly, as this information is not publicly released by Appen).
Demand for Appen's services is rising rapidly, as the use of AI and virtual assistants such as Siri and Alexa become more and more prevalent. These services rely on being able to understand us, and Appen provides valuable data in natural language processing and automated speech recognition that makes this happen.
Additionally, companies such as Alphabet, Uber and Tesla are investing heavily in autonomous driving, which requires an enormous amount of machine learning to scale effectively. This is an industry many are predicting will reshape the entire global economy over the coming decades and Appen is positioning itself well to be a major cog in this machine.
Is it too late to Appen buy shares?
Appen's shares are currently trading with a Price/Earnings ratio of almost 65, which is extremely high. However, with revenue increasing from $166 million in 2017 to $364.4 million in 2018 (an increase of almost 120% in one year), you can see why the market is pricing this stock so high. Underlying EDITDA increased by an even higher amount (over 150%) in the same period so it would be a high understatement to say the company is looking solid.
Saying this, in my opinion, it isn't too late to buy into Appen if you intend to hold for the long term. I am confident in both the future-shaping abilities of this company and the strong growth in its future. Personally, I am waiting for a 'buy-the-dip' opportunity to enter into a position, but I may well be kicking myself all over again next month.
Another company investors could be kicking themselves for missing out on is this ASX small-cap, poised to benefit from a $22 billion boom industry.
