There are some wonderful ASX tech shares that might be long-term opportunities at the current prices.
Tech businesses with a strong operating model can produce good profit margins if they reach sufficient scale.
The below two ASX tech shares are producing growth and are expecting more:
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Volpara Health Technologies Ltd (ASX: VHT)
Volpara is currently rated as a buy by Morgans with a price target of $1.87. That suggest a potential upside of more than 60% over the next 12 months if the broker is proven correct.
The company aims to prevent advanced-stage breast cancer through an integrated breast health platform that assists in the delivery on personalised patient care.
Its FY22 focus is risk and genetics. The company aims to invest and improve for both the radiologist and the patient. Whilst its focus is on breast cancer, it's also "seeking partners" to help give 'lung' the focus it deserves.
Its gross profit margin has increased to 91% and Volpara's market share in the US has improved to around a third.
A key focus of the ASX tech share is increasing its average revenue per user (ARPU).
It wants to increase ARPU by selling a platform, not just a product. On 1 October 2020, it released the Volpara breast health platform. This includes all of its products with the power of multiple integrations to make the suite even more compelling, according to the company. Most new sales are now for two or three products, representing significantly increased ARPU. The relationship with genetics companies is expected to increase that further.
Upselling is an important part of the strategy. Management said that the upselling is a very significant opportunity. It is upgrading MRS 6 users and moving MRS 7 users to the more compelling patient hub, along with Volpara products. The company has seen that for those that upgrade it leads to an increase in 200% to 300% of recurring revenue.
Class Ltd (ASX: CL1)
Class is a leading provider of cloud accounting software for the self-managed superannuation fund (SMSF) sector.
It's currently rated as a buy by the broker Ord Minnett. The broker has a price target of $2.40 on the ASX tech share, which suggests that the Class share price could potentially rise by around 40% over the next 12 months.
The company is still growing its market share in the SMSF accounting space. But it also has new products that it's looking to grow its total addressable market with.
It has made acquisitions to enter into other areas like corporate compliance and trust compliance. Those acquisitions include NowInfinity, Smartcorp and ReckonDocs. This allowed it to quickly gain market leadership in the documentation and compliance sector – its market share is now 14% by revenue.
Between FY19 and FY21, it's looking to increase its revenue from $38 million to $54 million, with an underlying earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 40%.
New Class products can increase its relevance with existing accounting clients, and win new customers, with Class Portfolio and Class Trust.
As Class gets bigger, it's expecting to need to spend less as a percentage of revenue on product development, which could lead to stronger margins.
The ASX tech share is expecting that being able to offer a suite a products will lead to organic revenue growth.
