The Pushpay Holdings Ltd (ASX: PPH) share price could be one to think about for the long-term at the current level.
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What is Pushpay?
Pushpay is a business that provides donation tools for large and medium US churches. It also has church management tools which were boosted by the acquisition of Church Community Builder.
But that's what it does. These are reasons why Pushpay could be one to think about:
Valuation
The value investors get when they buy shares is an important part of the investment return potential.
Share prices change every day. Over the weeks, valuations can change quite significantly. This can open up new opportunities for people to think about.
Since 27 July 2021, the Pushpay share price has fallen by around 7.5%. That means investors can get a lower price than a couple of weeks ago.
According to Commsec, the Pushpay share price is valued at under 27x FY23's estimated earnings.
Ongoing growth and expansion of the business
The business continues to grow in multiple ways.
In FY21, total processing volume increased by 39%, or US$1.9 billion, to US$6.9 billion. Management are expecting continued growth in total processing volume driven by continued growth in the number of customers using its donor management system, further development of its product set resulting in higher adoption and usage, and increased adoption of digital giving in its customer base.
The total customers increased by 2% to 11,099 over the last year.
Pushpay has seen a "clear shift" to digital means where customers (churches) are utilising its mobile-first technology solutions to communicate with their congregations. During the particularly-affected COVID-19 periods, churches pivoted to emphasise live streaming, digital giving and driving connection through their apps for continued engagement with communities. The company hasn't seen a meaningful proportion of digital giving revert to non-digital means, suggesting that the US faith sector may have gone through a fundamental technological shift.
Using the stock split-adjusted price, the Pushpay share price went as high as $2.19 in July 2020 as the company assisted churches during lockdowns in the US.
The business is seeing an increasing number of customers utilising the combined Pushpay and Church Community Builder platforms. Management believe this shows the market values a fully integrated solution. ChurchStaq sales as a percentage of total sales have increased following its launch in September 2020 across all customer segments.
Pushpay is going to invest for more growth in the Catholic segment with an initial investment of US$6 million to US$8 million in FY22 for product design, development, sales and marketing.
In FY22, the company is expecting earnings before interest, tax, depreciation, amortisation, foreign currency and impairments (EBITDAFI) of between US$64 million to US$69 million. In FY21 it made EBITDAF of US$58.9 million.
Operating leverage from the growth
Pushpay expects significant operating leverage to accrue as operating revenue continues to increase, while growth in total operating expenses remains low.
FY21 saw operating revenue increase by 40% whilst total operating expenses increased by 9%. As a percentage of operating revenue, total operating expenses improved by 11 percentage points from 47% to 36%.
Pushpay's net profit grew 95% to US$31.2 million and operating cashflow grew 145% to US$57.6 million.
Management said that Pushpay's cash flow provides flexibility, as it continues to assess further potential strategic acquisitions that broaden Pushpay's current proposition and add significant value to the current business.
Higher profit margins could mean faster profit growth as revenue rises, which could also help the Pushpay share price.
