Shares in digital payments company Pushpay Holdings Ltd (ASX: PPH) have struggled so far in 2021.
They're down more than 13% year-to-date and 30% short of the 52-week high of $2.25 they reached in October last year. Yet, the fall in the Pushpay share price has come despite the company continuing to report strong financial results.
Company Background
Pushpay is an up-and-coming technology company headquartered in New Zealand. It develops digital payment and social media platforms targeted at the church sector, with a particular focus on the US market.
Pushpay's software platforms allow church leaders to communicate with their congregation online, boosting engagement and creating a sense of connection. But the application's real selling point is its ability to facilitate online donations.
Pushpay gives church leaders the ability to monitor levels of giving amongst their congregation and it can even provide insightful analysis and reporting. Church leaders can use these tools to run more targeted and successful money-raising campaigns.
The Financials
In Pushpay's most recent financial report – covering the year ended 31 March 2021 – the company reported revenue growth of 39% (to US$181.1 million). Gross margin improved by a solid 3 percentage points over the course of the financial year, from 65% to 68%.
The improved margins, combined with diligent cost management, meant Pushpay was able to grow its bottom line much faster than its top-line revenues. The company's net profit after tax jumped an eye-watering 95% to US$31.2 million.
And despite all this good news, the Pushpay share price has continued to edge lower. Its current price of $1.56 isn't much better than the 52-week low of $1.40 it hit back in January.
What has happened to the Pushpay share price?
Considering the company's strong financial performance, it's difficult to gauge why investors have been so turned off by Pushpay recently. However, It is important to remember that Pushpay is coming off an incredible 2020, in which its share price surged 80% higher.
For its part, Pushpay is sending bullish signals to the market. The company's outlook for FY22 is for earnings before interest, tax, depreciation, amortisation, foreign currency gains or losses and impairments (a kind of obscure accounting measure abbreviated to EBITDAFI) to be in the range of US$64 million to US$69 million.
This would imply year-on-year growth of somewhere between 9% and 17%, based on the company's FY21 EBITDAF (there were no reported impairments) of US$58.9 million.
This would fall well short of the roughly 134% uplift in EDBITDAF Pushpay reported in FY21 – implying a potential slowdown in the company's high rate of growth. Add continued COVID-19 and economic uncertainty into the mix and it's possible to see why some investors might be spooked.
However, as Pushpay went some way to point out in its FY22 results announcement, since its inception in 2014, the company has always delivered or exceeded its own earnings guidance.
If the company can repeat that feat again in FY22 it may go some way to reassuring investors and drive further growth in the Pushpay share price.
