I'm a big fan of growth shares and believe the tech sector is one of the best places to find them right now. However, some of these shares are trading on nosebleed valuations.
While I have confidence that the likes of Afterpay Touch Group Ltd (ASX: APT) and WiseTech Global Ltd (ASX: WTC) will live up to expectations over the long-term, they are risky investment options today due to their current valuations that already factor in a lot of future success.
But not all tech shares are trading at astronomical levels. I think the three tech shares below are trading on reasonable multiples right now:
Appen Ltd (ASX: APX)
Of the so-called WAAAX stocks, I would argue that Appen is the best value of the group. Although I do have slight concerns over how concentrated its client-base is and how the loss of a major customer could have a big impact on earnings, I remain confident that its high quality service means its major clients are going nowhere and expect demand for its services in the machine learning and artificial intelligence markets will continue to grow over the medium term. So with its shares priced at 30x estimated FY 2019 earnings, it could be worth considering.
Aristocrat Leisure Limited (ASX: ALL)
I think that this gaming technology company is one of the best value growth shares on the Australian share market right now. Based on earnings forecasts from a recent note out of Goldman Sachs, Aristocrat Leisure's shares are currently changing hands at 25x estimated full year earnings and under 20x estimated FY 2019 earnings. I think this is cheap for a company expected to grow earnings by 40% this year and 26% next year.
Kogan.com Ltd (ASX: KGN)
This fast-growing ecommerce company could be worth a look after its shares fell 50% from their 52-week high. Heavy insider selling and no guidance for FY 2019 has been largely to blame for Kogan.com's fall from grace. And while I am concerned by the decision to not provide a trading update with its full year results in August, I feel the selloff has been overdone. Based on UBS' earnings per share estimate of 26 cents in FY 2019, the company's shares are now priced at under 20x forward earnings. But with its AGM coming up in the next few weeks, investors may want to consider playing it safe by waiting for an update at the meeting before picking up shares.
