There are a few reasons why the Pushpay Holdings Ltd (ASX: PPH) share price looks attractive right now.
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What's Pushpay?
Pushpay is an ASX share that predominantly operates in the digital donation space.
It provides services to the large and medium US church sector.
Some of the services it provides includes church management systems, donation tools and livestreaming.
The livestreaming option has been particularly useful in the last 12 months with all of the impacts from COVID-19.
Reasons why the Pushpay share price could be really good to look at right now:
Exposure to digital payments trend
There is an ongoing trend around the world of payments going from cash to digital payments.
For the businesses operating these payment networks, it can be a very profitable sector.
Pushpay is one of the businesses driving that change in the church sector. It's very valuable for churches because it means that the donation doesn't have to be received physically.
Over the long-term, the trend for more church donations to be done electrnically could continue.
In the most recent Pushpay result, for the six months to 30 September 2020, it said that total processing volume increased by 48% to 3.2 billion.
Over the long-term, Pushpay is targeting a 50% market share. Management believe this will turn into $1 billion of annual revenue.
Expansion plans
The current earnings is generated by the large and medium US churches.
But Pushpay has further growth plans.
It's looking to expand its offering into other countries and regions over time. Some of the target places include South America and South East Asia.
Pushpay also said that it has allocated an initial investment of resources into developing and enhancing the customer proposition for the Catholic segment of the US faith sector. Focused investment into the Catholic segment represents a significant milestone as Pushpay continues to execute on its strategy to become the preferred provider of mission critical software to the US faith sector.
There's also the potential down the track for Pushpay to expand into non-profit organisations as well as education and tertiary sector donations.
Strong growth
Pushpay is generating a lot of growth at the moment, particularly over the last 12 months during this COVID-19 period.
In the six months to 30 September 2020, Pushpay saw operating revenue grow by 53%. This was powered higher by the processing volume increase.
However, Pushpay is also generating a lot of profit growth, cashflow and operating leverage.
In the six months to 30 September 2020 earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) jumped by 177% to US$26.7 million. The EBITDAF margin grew from 17% to 31%. This increase occurred with total expenses falling from 50% to 38% as a percentage of operating revenue.
Operating cashflow surged higher by 203% to US$27 million whilst the net profit after tax (NPAT) went up by 107% to US$13.4 million.
In FY21, Pushpay is expecting EBITDAF to be in a range of US$56 million to US$60 million.
What's the Pushpay share price valuation?
According to Commsec, the Pushpay share price is valued at 22x FY23's estimated earnings. This forward valuation is lower than quite a few ASX shares in the technology space.
