3 reasons why the Pushpay (ASX:PPH) share price might be a buy

There are a number of reasons why investors might like Pushpay.

| More on:
man holding mobile phone that says make donation

Image source: Getty Images

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

There are quite a few different reasons why the Pushpay Holdings Ltd (ASX: PPH) share price might be attractive to investors.

What is Pushpay?

Pushpay is a technology business that enables US churches to manage their church, connect with their community and process electronic donations.

It also has a business that it acquired called Church Community Builder which offers increased functionality for churches.

Here are three key reasons why Pushpay could be a business to consider:

In-demand service

The world is going increasingly digital. Pushpay is a key business that is helping US churches to go electronic.

At 31 March 2021, Pushpay had over 11,000 customers. Some of them are using the donor management system, some are using the church management system and some use both.

ChurchStaq is the combined offering of both the Pushpay services and Church Community Builder where everything can be accessed through the single service.

With its giving and donor management service it can engage new donors, increase recurring giving, remove barriers to generosity and it offers various forms of donation including web, mobile, text and cash/check.

The 'My Church App' allows increased participation, access to church media, targeted communication, groups and calendar and "pre-check".

ChurchStaq's church management system is "comprehensive", it also allows for groups, events, check-in, service planning and prices. There are also giving dashboards and analytics.

Having a strong offering allows Pushpay to attract and retain clients. It has plans to search for other acquisitions that may broaden its current proposition and add significant value to the current business at a quicker pace than what could be achieved organically.

Operating leverage

There are a number of financial measures that show that Pushpay is achieving operating leverage.

In FY21, Pushpay's operating revenue went up by 40% to US$179.1 million. It reported that its gross profit margin increased by three percentage points for FY21 from 65% to 68%.

Total operating expenses only increased by 9%. As a percentage of operating revenue, total operating expenses improved by 11 percentage points from 47% to 36%.

Pushpay explains that it adopted "best-in-class" software tools and scalable process early in its development. Combined with "strong financial discipline", these investments will allow significant operating leverage to be achieved as revenue grows.

Net profit in FY21 increased by 95% to US$31.2 million and operating cashflow went up 145% to US$57.6 million.

Pushpay says it expects significant operating leverage to accrue as operating revenue continues to increase, while growth in total operating expenses remains low.

Growth plans

Pushpay has embarked on serving the Catholic segment. It's focused on establishing relationships and increasing engagement with key stakeholders. In FY22, Pushpay is expecting to invest between US$6 million to US$8 million.

The company expects the benefits from the Catholic segment to be realised over the course of the next financial years.

It has set of goal of market share of more than 25% of the Catholic church management system and donor management system over the next five years.

Pushpay pointed out that the Catholic church is closely associated with many education providers and non-profit organisations, which presents further opportunities within the US and other international jurisdictions.

The company has previously stated that international growth to regions like South America and South East Asia.

What is the Pushpay share price valuation?

According to Commsec, Pushpay shares are valued at 30x FY22's estimated earnings.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Oil industry worker climbing up metal construction and smiling.
Energy Shares

ASX 200 energy shares lead the market as US trade deals fuel optimism

ASX energy shares lifted 3.94% as more US trade deals led to improved market sentiment.

Read more »

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Broker Notes

These ASX 200 shares could rise 50% to 60%

Brokers believe these shares could deliver big returns for investors.

Read more »

A girl is handed an oversized ice cream cone with lots of different flavours.
Best Shares

8 ASX All Ords shares that tripled in value in FY25

Just 8 out of the 500 companies making up the ASX All Ords achieved share price growth of 200% or…

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »