There are a lot of ASX tech shares that are struggling right now. Rising interest rates have sucked the momentum out of many businesses that haven't been able to prove their profitability.
However, this doesn't mean that all tech shares are unprofitable. In fact, there are a few ASX tech shares that are highly profitable when it comes to their bottom line margins. Yet, despite their wild profitability, all three of the companies below have succumbed to share price pressure this year. Perhaps now is the time to take a closer look.
Here's a look at the most profitable ASX tech shares in the All Ords.
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Profit margin royalty among ASX tech shares
Before we get started, to be clear, we are ranking profitability based on the earnings from continuing operations margin for the last 12 months. In other words, margins are what matters here — not the absolute dollar value of profits. In addition, this is only looking at tech companies inside the All Ordinaries Index (ASX: XAO).
Altium Limited (ASX: ALU)
Getting us underway is printed circuit board design software company, Altium. The famous 'WAAAX' group constituent has recently achieved new heights in terms of revenue, but how does its profitability stack up?
Based on its earnings for the last 12 months, Altium is beating out 16 other profitable ASX tech shares in the All Ords. At the end of December 2021, the company had notched up US$41.53 million in earnings — representing an earnings margin of 20.5%.
Recently, Bell Potter reiterated its buy rating on Altium with a price target of $41.25 per share. The current $28.11 share price reflects a 60.6 times price-to-earnings (P/E) ratio. Interestingly, the multiple is still above average despite Altium shares falling 37% in value so far this year.
TechnologyOne Ltd (ASX: TNE)
Founded 35 years ago, TechnologyOne is an enterprise software company that doesn't usually get the same level of media coverage as newer ASX tech shares. Yet, this is a business that has achieved new record profitability each financial year going all the way back to FY2012 — 10 years ago.
In FY21, TechnologyOne stayed on its upward profit trend, posting a record $72.7 million in net profits after tax (NPAT) — this represented a 15% increase from the prior year. Meanwhile, the all-important figure in this write-up is the 23.4% earnings margin.
Analysts are forecasting a nearly 16% growth in earnings in FY22. Currently, the company is trading on a 45 P/E. Notably, the TechnologyOne share price is down 20% year-to-date (YTD).
WiseTech Global Ltd (ASX: WTC)
The ASX tech share finding itself in the top spot has profits in spades. Logistics platform provider WiseTech Global also boasts the largest dollar amount of earnings in the last 12 months of those featured in this article.
A combination of strong top-line growth and the implementation of $20.2 million worth of cost reductions helped WiseTech deliver a strong first half of profits for the period ending December 31 2021. Ultimately, this supported the impressive 25.7% earnings margin.
The WiseTech Global share price trades on a P/E multiple of around 94 times. Since the start of the year, shares in the company have fallen by 30%.
