As a growth investor, tech stocks are at the top of my watchlist. Of those, Webjet Limited (ASX: WEB) has easily been a favourite, along with Appen Ltd (ASX: APX) and Xero Limited (ASX: XRO).
If you had invested in these ASX tech companies in early January, you would have multiplied your wealth significantly.
• Webjet: 55% increase YTD for a $16.42 close yesterday.
• Appen: 90% increase YTD for a $24.31 close yesterday.
• Xero: 28% increase YTD for a $53.52 close yesterday.
Webjet Limited
Webjet is both a B2C and B2B digital travel agency. It enables users to compare and combine flights, accommodation, packaged holiday deals, insurance and hire cars domestically and internationally.
It's Webjet's B2B platform, WebBeds, that has attracted considerable growth this year. WebBeds' EBITDA grew 135.2% to $30.1 million in just 6 months to December 2018. Webjet itself amassed a whopping 42% growth in EBITDA to $58 million to secure the second largest market share in the B2B travel industry.
These stellar results were in part driven by Webjet's acquisitions of JacTravel, which wholesales hotel rooms and group tours, and Destinations of the World, a B2B accommodation wholesaler.
While Webjet is unlikely to return another 50% in the next 5 months, I'm a firm believer in its digital strategy and aggressive growth tactics in the B2B travel space.
Appen Ltd
Appen has built a crowdsourced labour pool of remote workers who create data sets for clients. This is used as input for training machines with applications ranging from image recognition software to search tools. The company claims to have 1 million people who work for them from the comfort of their homes. Appen's customers include Microsoft, Google and Spotify.
Appen's most recent results show an annual growth rate of 25% based on its $42 million FY earnings. Analysts expect that its final forecast will reach $86 million by 2022. Currently, EPS sits at $0.39, and this is expected to almost double to $0.70 in just 3 years.
This could be a quality long-term tech stock that could be an outlier in your portfolio.
Xero Limited
Xero offers a cloud-based accounting software-as-a-service for small and medium-sized businesses. It's a robust accounting solution with intricate accounting features, detailed reports, unlimited users and has a connected app functions which allows for over 700+ integrations across companies like Stripe, PayPal and Deputy. The company has over 1.5 million subscribers and services 16,000 businesses internationally.
Xero is the leader in cloud accounting across Australia, New Zealand and the UK. It has growth 62% year-on-year in North America, making headwinds in Hong Kong, Singapore and even South Africa. This will definitely be a point to take note of in Xero's FY results.
Based on 2020 earnings, Xero is expected to be trading on a 177x multiple, far ahead of its WAAAX peers. This means that investors are willing to dish out a lot of capital to buy into Xero's profits and its attractive 83% gross margin. Given strong penetration across global markets, this company is poised for growth.
If you're interested in growth verticals but these stocks aren't for you, perhaps you should check out this lesser known ASX company.
