Canaccord Genuity have released an excellent report on the Australian tech sector today. One sentence reads:
We introduce the well-publicized rule-of-40/efficiency score to the ASX tech sector and screen for companies that meet this criterion for FY19 and more importantly FY20. The “rule-of-40” or efficiency score (revenue growth plus EBITDA margins >40% =quality growth) is primarily used to value software companies; however, we believe it is a proxy to evaluate the quality and attractiveness of stocks across the ASX tech sector. In our view, there is a very clear correlation between highly ranked quality/growth companies and consistent stock outperformance with elevated valuation multiples. Relevant stocks that screen well using this metric for FY20 include APT (100%), LVT (97%), NXT (71%), REA (70%), Z1P (70%), WEB (64%), WTC (64%), ALU (63%), NEA(63%) and IFM (58%), while stocks that screen unfavorably include MP1 (19%), FLN(21%), OVH (23%), KGN (23%), RHP (24%), CAT (24%), GBT (26%) and SDA (26%).
More great news for LVT - these guys know tech very well!
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- Ann: Investor Presentation
Ann: Investor Presentation, page-24
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