2 great ASX tech shares to buy today

There are some wonderful ASX tech shares that Aussies can buy. They may be thinking about for your portfolio, including Class Ltd (ASX:CL1).

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ASX tech shares could be worth looking at right now with volatility picking up.

Some technology businesses have been sold in recent weeks, so investors may be able to find a nicely priced business on the ASX share market.

These technology businesses are reporting double digit levels of growth in FY21 and could be worth thinking about:

Temple & Webster Group Ltd (ASX: TPW)

This ASX tech share has been one of the most popular businesses that has seen strong growth since the onset of COVID-19. Despite yesterday’s 8.8% gain, the Temple & Webster share price is still down by 24% since 15 February 2021.

However, if an investor just focuses on the reported growth then they’d see that Temple & Webster is generating a good increase compared to the prior corresponding period.

In the half-year result, Temple & Webster said that its active customers jumped 102% to 678,000. This helped revenue grow 118% to $161.6 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) went up by $12.5 million, or 556% in percentage terms, to $14.8 million. Net profit after tax (NPAT) grew by $9.3 million, or 320% in percentage terms, to $12.2 million – this included a $2.4 million of tax expense in HY21, whilst HY20 had an income tax benefit of $0.9 million.

The ASX tech share is demonstrating operating leverage with its improving profit margins. Fixed costs as a percentage of sales decreased from 11.6% to 7.5%.

The company is working on a number of strategies to help its high-growth strategy. It’s accelerating its investment in digital and ‘above the line’ marketing to outgrow the market. Temple & Webster is using price and promotions to drive first time customers. The business is investing in its people to strengthen its technology, data, personalisation, private label and delivery experience moats. The final aim is growing its business to business sales and operational teams.

Growth has continued into the second half, with year on year revenue growth of 118% to 23 February 2021.

Temple & Webster is aiming to become the largest retailer of furniture and homewares in its home market, similar to international peers.

According to Commsec, the Temple & Webster share price is valued at 32x FY23’s estimated earnings.

Class Ltd (ASX: CL1)

This is an ASX tech share that provides cloud accounting software predominately for the self-managed super fund sector. Broker Ord Minnett currently rates Class as a buy with a share price target of $2.40.

However, it also has other Class products. One is called Class Trust for, you guessed it, trusts. Class Portfolio is software that manages the administration, accounting and reporting needs for clients’ investment portfolios.

Class has also been acquiring bolt-on software providers. This has expanded its ability to service customers. NowInfinity provides a suite of solutions which aims to simplify the management of entities and registers.

The ASX tech share has been increasing its customer base, partly through the acquisitions, which allows it to cross-sell its services to all of those different clients.

In HY21, the software business saw revenue growth of 27% to $25.9 million and EBITDA growth of 29% to $10.4 million.

As a result of the ReckonDocs acquisition, it decided to increase its revenue growth target for FY21 to 22% with an underlying EBITDA margin target of 40%.

The ASX tech share’s multi-software offering is winning over key clients such as Findex which signed up for the NowInfinity documentation suite. It’s already using many of the other products including SMSF, Portfolio, NowInfinity Trust Register and Corporate Compliance.

According to Commsec, the Class share price is valued at 20x FY23’s estimated earnings.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of Class Limited. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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