If you were an early investor in Appen Ltd (ASX: APX), I commend you. In just 5 years, the company is now a billion-dollar company and an Australian tech favourite. Since it listed on the ASX, Appen has grown around 4000% from $0.63 to $26.20 as of yesterday.
If you haven't been keeping tabs, here's why Appen should be on your radar.
What does Appen do?
Appen has built a crowdsourced labour pool of remote workers which annotate training data for machine learning applications on behalf of clients. The company has over 1 million working for them from the comfort of their homes.
Appen services big tech companies like Google, Microsoft and Facebook, which are key to unlocking its 119% growth in annual revenue, as reported in its half-year results.
The opportunity
For the last 10 years, businesses faced an uphill battle in accessing the training data required to train machines. As a result, there was a stark increase in image labelling requests – a highly arduous and manual task.
This is where Appen was born. The company has two key divisions: content relevance, which provides annotated data for search and social media, and language resources for speech data. Often, clients require this information to be updated quarterly, or even monthly, which allows Appen to benefit lucratively from repeat customers.
Demand for Appen's services is also growing. With the rise of driverless vehicles, tagging photos of roads and street signs presented in images is critical for navigation.
Strategic acquisitions
Appen has made strategic acquisitions with a strong value-add to its business.
In 2017, it acquired Leapforce for $US80 million. This added 800,000 remote workers to Appen's pool (at the time) of just 400,000. Leapforce bolstered the company's growth, contributing 50% of Appen's 2018 revenues.
Just a couple of months ago, Appen announced its acquisition of Figure Eight. This transformed the highly manual processes Appen used to manage its workers, particularly as Figure Eight's software was capable of annotating dash-cam footage 50 times faster than humans.
Both companies also have minimal overlap in customer base, furthering the synergetic relationship.
Foolish takeaway
In its half-year report, Appen announced stellar results. EBITDA grew $71.3 million, rising 153% since 2017. This brings its annual five-year growth rate to a whopping $79 million.
Since the beginning of this year, Appen's stock price has risen 104% alone. It currently operates on a 67.5x price-to-earnings (P/E) multiple, which is far above the 16.4x average in the IT industry. This shows that investors are bullish on Appen stocks and would pay a high price for a piece of its growth.
Appen has continuously delivered impressive results and is likely to beat market expectations in its full-year results.
