At this share price is Pushpay a millionaire maker?

The Pushpay Holdings Ltd (ASX:PPH) share price could be a very strong performer at this price. In this article I explain why it could be.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I think at this Pushpay Holdings Ltd (ASX: PPH) share price, it make great returns over the long-term.

I'm not saying that if you invest $500 you'll become a millionaire. But I do believe that the Pushpay share price can produce very strong returns for investors due to a number of factors.

A quick overview of Pushpay

Pushpay describes itself as a donor management system, with donor tools, finance tools and a custom community app for the faith sector, non-profit organisations and education providers.

Currently, its biggest client base is large and medium US churches. These churches have large congregations which provide an enormous amount of donations each year. Pushpay is leveraged to this through the digital donations that it processes through its system on behalf of the churches.

Recently Pushpay acquired Church Community Builder which provides a software as a service (SaaS) church management system, largely in the US.

Church Community Builder provides a platform that churches use to connect and communicate with their community members, record member service history, track online giving and perform a range of other administrative functions.

Why I think the Pushpay price share has so much growth potential

The combined Pushpay business can offer clients a stronger combined service to customers. Each business can try to sell to the other's client base. Plus, the combined business can make a compelling offering to potential new clients. That's good news for earnings and the Pushpay share price. 

COVID-19 conditions have really accelerated the growth prospects for Pushpay. Social distancing and gathering restrictions led Pushpay to having a stronger FY20 than it first expected. It also helps that Pushpay offers clients a livestreaming service.

In FY20 Pushpay grew its revenue by 32% to US$129.8 million. Not only did Pushpay grow its revenue by a strong amount, its operating leverage also improved substantially. The gross margin rose from 60% to 65% over the year. As a percentage of operating revenue, total operating expenses improved from 65% to 52%.

It's no wonder the Pushpay share price has shot up since reporting.

These are impressive improvement numbers. That improvement means that Pushpay's additional revenue in FY21 will add much more to the bottom line than the revenue added in FY19.

Earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) rose by US$23.5 million, up from US$1.6 million to US$25.1 million.

In FY21 Pushpay is hoping and expecting to at least double its EBITDAF in FY21 to between US$50 million to US$54 million.

Longer-term growth

The Pushpay share price has doubled so far in 2020. It might be too much to expect that the company can double in size again over the next eight months – but I think it could comfortably beat the overall ASX return.

In FY20 the company generated US$130 million of revenue. Pushpay is aiming for US$1 billion from the medium and large US church sector over time. An extra US$870 million of revenue would turn Pushpay into a much bigger business. Look at how much operating leverage Pushpay was able to generate by adding just US$31 million of extra revenue.

The large and medium US church sector isn't the only growth avenue for Pushpay. There are churches in other countries as well as other religions in the US (and globally).

Plus, Pushpay itself has acknowledged that it services not-for-profits and education – these are also extremely large donation sectors that Pushpay could grow into over time. But that's just a bonus to the current thesis. 

Pushpay is now cashflow positive, it generated US$23.5 million of operating cashflow in FY20. This will allow Pushpay, in its own words, to "assess further potential strategic acquisitions that broaden Pushpay's current proposition and add significant value to the current business."

Foolish takeaway

Pushpay is currently trading at under 35x FY22's estimated earnings. I think over the next five years Pushpay could be one of the best-performing small-to-mid cap ASX shares. I believe the Pushpay share price looks very compelling in my opinion. Even after the strong run this year.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Growth Shares

happy investor, share price rise, increase, up
Growth Shares

Where to invest $5,000 into ASX growth shares now

These shares could be destined for big things according to analysts.

Read more »

ETF spelt out with a piggybank.
ETFs

Want to buy ASX growth shares? Consider these ETFs instead

Growth ETFs can be easier to invest in than shares.

Read more »

A businessman compares the growth trajectory of property versus shares.
Growth Shares

Are these 2 top ASX growth shares buys?

ASX growth shares can deliver strong results. Should these stocks be in your portfolio?

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Growth Shares

These ASX growth stocks could rise 80% to 100%

Let's see what brokers are tipping as buys with big return potential.

Read more »

Man holding a tray of burritos, symbolising the Guzman share price.
Share Market News

Wingstop mania hits Sydney — is Guzman y Gomez next in line to soar?

Can Guzman y Gomez be Australia’s next fast food success story on the ASX?

Read more »

A smiling woman sits in a cafe reading a story on her phone about Rio Tinto and drinking a coffee with a laptop open in front of her.
Growth Shares

3 ASX shares for beginners to buy with $500

These shares are highly rated by analysts. Let's see why they could be top picks for beginners.

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Growth Shares

Invest $5,000 into these excellent ASX growth shares

These shares could be top picks for growth investors. Let's find out why.

Read more »

three businessmen high five each other outside an office building with graphic images of graphs and metrics superimposed on the shot.
Growth Shares

3 ASX 200 shares that are up more than 30% in a month. Can they go higher?

Are there more gains ahead for these shares? Let's find out.

Read more »