The Appen Ltd (ASX: APX) share price has been on a tear over 2023 so far. Appen shares were wallowing at just $2.36 each back at the start of January. But today, the ASX tech and artificial intelligence (AI) stock is asking $3.32 each, despite some volatility dragging it almost 5% lower at the time of writing. That means that Appen has still risen by a healthy 40% year to date.
But I'm still not buying. Appen is an interesting company, to be sure. But it has never demonstrated the kinds of things I like to look for in an ASX tech stock.
For one, it doesn't seem to be growing. Back in February, Appen delivered its annual results, covering the 2022 financial year (FY22). The company announced revenues of $388.5 million for FY22, down 13% from the $447.3 posted for FY21. Appen's underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell heavily as well, dropping 86% from $77.1 million in FY21 to $11 million in FY22.
On the bottom line, Appen brought in a statutory loss of $239.1 million, down substantially from last year's profit of $285 million.
Not exactly the direction I like to see these kinds of metrics heading in. As such, I'm staying away from Appen shares, for now at least.
What is the ASX tech stock I'd buy over Appen?
Instead, I'm far more interested in fellow ASX tech stock Xero Limited (ASX: XRO).
Xero shares have also had a stunning 2023 so far. This provider of cloud-based accounting services is up a whopping 55% year to date, rising from around $70 a share to the $108.72 we see today (at the time of writing). That's a rise even more potent than Appen's, as you can see below:
But, unlike Appen, Xero is a company that is growing its key metrics at a very impressive rate. Over FY222, Xero reported a 29% rise in revenues to NZ$1.1 billion and an 11% rise in EBITDA to NZ$212.7 million. Subscribers were up 19% to 3.3 million.
The company still lost money on the bottom line, with a net loss of $9.1 million. But this is normal for Xero as it has a habit of aggressively reinvesting its earnings back into the business.
This is the kind of performance I like to see in an ASX tech stock. Appen may be in an exciting industry in AI. But what matters more to me is fundamental performance. And here, Xero is the clear winner.
