There are a few really good reasons why the Pushpay Holdings Ltd (ASX: PPH) share price could be worth looking at.
Pushpay is a payments and technology business. It provides electronic donation capabilities for large and medium US churches. Pushpay also provides number of church management and community tools.
Some of those tools include kids and volunteer pre-check, group participation, events, custom content and branding, sermons and audio player, push notifications, app giving and transaction history, giving analytics. It also has a livestreaming option.
Pushpay can claim multiple benefits for the church – increased participation, the ability to engage with new donors, increase recurring giving and removing barriers to generosity.
There are many reasons why the Pushpay share price might be worth owning, including these three:
Strong top line growth
ASX shares that are growing revenue at a double digit pace give themselves a better chance of producing shareholder returns.
Pushpay is seeing a number of positive growth numbers that help revenue. Over FY21, its total customers increased by 2% to 11,099. Average revenue per customer (ARPC) per month grew 12% to US$1,475. Total processing volume in FY21 rose 39% to US$6.9 billion.
All of these different measures helped operating revenue rise by 40% to US$179.1 million.
Over the long-term, Pushpay is aiming to grow its annual revenue to US$1 billion. That would represent a market share of around 50%.
One of the main ways that Pushpay is attracting so much demand for its software is Churchstaq. That's the offering of Pushpay tools, combined with all of the tools offered by Church Community Builder.
Pushpay quoted a client from the Emmanuel Christan Centre who said that the functionality of the Pushpay tool is the best he has ever experienced.
The annual revenue retention rate is more than 100% – customers appear to be loyal and sticky.
Operating leverage
Not only is Pushpay seeing strong growth of revenue, but it's also experiencing profit growth at a much faster pace.
As margins grow, it means that net profit can rise at a faster pace than revenue. Net profit is one of the key factors that investors look at when deciding what the Pushpay share price should be.
During FY21, Pushpay's gross profit margin increased by three percentage points from 65% to 68%. This helped net profit after tax increase by 95% to US$31.2 million and operating cashflow grow by 145% to US$57.6 million.
Pushpay said that it's going to continue to balance expanding its operating margins with opportunities to increase revenue growth.
Investing for the future
Pushpay is growing within its core customer base, but it's also going to invest for growth.
In FY22 it plans to invest US$6 million to US$8 million to establish relationships and increase engagement with key stakeholders in the Catholic segment. Two thirds of that money will be spent on product design and development. The rest will be spent on sales and marketing.
Management expect to see the benefits of this expenditure over the course of the following financial years.
Pushpay said that it's the "first step" in investing to grow outside of its existing core customer base. It has set a goal of winning more than 25% of the Catholic church management system and donor management system market over the next five years.
The ASX share pointed out that the Catholic church is closely associated with many education providers and non-profit organisations, which presents further opportunities within the US and other international jurisdictions.
It continues to look for acquisition opportunities to bolster its growth prospects.
Pushpay share price valuation
According to Commsec, the Pushpay share price is currently valued at 24x FY23's estimated earnings per share (EPS).
