The Australian tech sector is home to a large number of companies with the potential to grow strongly over the 2020s.
Two that have been delivering on expectations in recent times are listed below. Here’s why they have been tipped to continue this strong form in the future:
Damstra Holdings Ltd (ASX: DTC)
Damstra is a growing integrated workplace management solutions provider. Its popular cloud-based workplace management platform is used by businesses globally to track, manage, and protect their workers and assets. In FY 2020, Damstra was on form and delivered a 47% increase in revenue to $23.5 million. This was underpinned by strong demand from existing customers and a jump in new customers.
This positive form has continued in FY 2021. During the first quarter, the company reported record revenue, cash receipts, and operating cash flow. In light of this, management has reaffirmed its guidance for the full year and is forecasting revenue of $33 million to $35 million. This represents year on year growth of 60% to 70% and includes the benefits of the Vault acquisition.
This performance has impressed analysts at Morgan Stanley. They have put an overweight and $2.00 price target on the company’s shares. This compares to the current Damstra share price of $1.65.
ELMO Software Ltd (ASX: ELO)
ELMO is a cloud-based human resources and payroll software company that provides businesses with the ability to streamline a wide range of processes through a single unified platform.
As with Damstra, ELMO has been growing at a strong rate in 2020 despite the pandemic. In FY 2020 it reported a 19.7% increase in annualised recurring revenue (ARR) to $55.1 million. Pleasingly, the current financial year looks set to be equally positive, with management expecting to grow its ARR to between $72.5 million and $78.5 million. This will be an increase of up to 42% year on year.
Morgan Stanley was pleased with this guidance and recently reaffirmed its overweight rating and lifted the price target on ELMO’s shares to $9.30. This compares to the current ELMO share price of $6.34.
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James Mickleboro 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 Elmo Software. 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 Elmo Software. 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.