Unfortunately for its shareholders, the Appen Ltd (ASX: APX) share price tumbled 6% yesterday following the release of its full-year results. But does this decline make the language technology company a must buy now?
Here's what you need to know from yesterday's full-year report:
- Total revenue increased 34% to $111 million
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) jumped 24% to $17.2 million.
- Net profit after tax increased 26% to $10.5 million.
- Earnings per share of 10.8 cents.
- Targeting mid-to-high teen EBITDA growth in FY 2017.
Overall I thought this was another strong result from this exciting tech company which counts eight of the top ten global technology companies as customers.
A key driver in its top line growth was its Content Relevance segment. Revenue in the segment rose 44% to $73.2 million during the year. This was driven by the ongoing delivery of training data for machine learning-based search and social media services.
Its Language Resources segment put in another solid performance as well. Revenue grew 18% to $37.7 million thanks to the continuing demand for high quality speech data.
Is it a must buy?
Based on yesterday's result Appen's shares are changing hands at a little under 25x full-year earnings.
Whilst this is a touch higher than the average earnings multiple for the information technology industry, I feel it is more than fair for the level of growth it has produced.
Although management expects EBITDA growth to slow a touch in FY 2017, I believe mid-to-high teen earnings growth still makes Appen attractive at its current share price.
With that in mind I would put Appen up there with the likes of Aconex Ltd (ASX: ACX) and Altium Limited (ASX: ALU) as great long-term buy and hold investments.
