How far could your $10,000 go in this ASX tech share 

Could the Damstra Holdings Ltd (ASX: DTC) share price be the next ASX tech stock to deliver market leading returns?

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Damstra Holdings Ltd (ASX: DTC) is a provider of workplace management solutions in the form of integrated hardware and SaaS solutions for industries where safety and compliance is of utmost importance such as mining, resources and construction. It's been exactly one year since its initial public offering (IPO) at an offer price of $0.90 per share. With its recent share price and business performance, could Damstra be the ASX tech share to own? 

What does Damstra do? 

Damstra provides solutions to various workplace safety and compliance sensitive segments. This includes: 

  • Workforce management and onboarding, particularly contingent, casual, part-time or contractor workforces that are paid on an hourly basis 
  • Access control used to restrict access to properties, facilities, buildings and rooms
  • Learning management to offer courses to staff and provide an organisation with the ability to track and record enrolment, progress and completion of learning and development modules 
  • Asset management software used to track fixed assets in organisations such as the depreciation values on fixed assets and track repair and overhaul schedules 
  • Health, safety and environmental management including policies, risk assessments, incident reports, training records  

FY20 performance 

Damstra delivered a strong FY20 performance across the board with a 46.6% increase in revenue to $23.5 million and $4.8 million underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) compared to $1.8 million in FY19. The company's growth is accelerating with 30.5%, 47.7% and 46.6% increase in revenue between FY18-20 respectively. Its accelerating growth demonstrates the benefits of its scalable software and hardware platform. 

COVID-19 has acted as a tailwind for the Damstra business with many clients seeking a 'COVID' solution for workplace safety and compliance. This includes features such as fever detection, mobility tracking, managing people's access and integration with other systems.

What makes Damstra a leading ASX tech share candidate? 

I believe the combination of high client retention rates and stickiness combined with a scalable technology, digital adoption tailwinds and further product innovation makes Damstra a very strong ASX tech share candidate. 

It's engaged with organisations and sectors that it believes require an efficient, integrated and scalable solution that reduces staff down-time, injury rates and manual labour while improving risk and compliance outcomes relative to an on-premise model. The integration of both hardware and software in its solution increases the stickiness of its clients and creates a barrier of entry for competitors. This also creates further opportunities to sell new products and features to existing clients.

Its solutions have been designed to be scalable on a global basis, incorporating an industry agnostic platform which can be configured to accommodate the requirements of multiple segments of the market across various jurisdictions. 

Taking into consideration the bigger picture, the company is arguably in its early days, with its FY20 report providing multiple examples of its future potential. This includes revenue growth from cross-selling products to existing clients, fever detection integrated with facial recognition and smart paperless forms. 

Foolish takeaway

The Damstra share price has run up more than 25% in the last five trading sessions and is trading up 3.14% at $2.30 at the time of writing. Its characteristics in growth, M&A and innovation is reminiscent of sales and marketing software provider, Bigtincan Holdings Ltd (ASX: BTH), which has also experienced a significant share price run in recent years. While I wouldn't be buying Damstra at today's prices,  I would watch closely for an entry opportunity. 

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Damstra Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Damstra Holdings Ltd. The Motley Fool Australia has recommended BIGTINCAN FPO. 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 Scott Phillips.

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