Top performing technology stocks
Although Australia’s technology sector is relatively small, there are some heavy hitters making their name here and overseas.
Investing in Technology
Technology is pervasive in our everyday lives. Certainly, the technology sector seems to reflect this as it is consistently one of the most dynamic and fastest-growing sectors of the Australian stock market. We have a number of world-leading technology companies that have delivered fantastic returns to shareholders in recent years. In this article, we identify three ASX-listed technology stocks that could be worth considering.
Overseas, particularly in the USA, technology companies are among some of the largest drivers in the local economy. In fact, at the time of writing, the largest companies in the USA by market capitalisation were: Apple, Microsoft and Alphabet (Google).
RANK | Company | Market Cap (As of 12/01/21) |
---|---|---|
1. | Apple (AAPL) | $2.85 T |
2. | Microsoft Corporation (MSFT) | $2.36T |
3. | Alphabet (GOOGL) | $1.85T |
As tech companies tend to invest heavily in research and development, they are known for their innovation and inventiveness. The growing competition in this area can also lead to a steady stream of new and improved technologies. While there can be growth opportunities in the tech sector, it is important investors have a good understanding of modern technology and the tech products available before investing.
So, when it comes to the tech sector in Australia, here are a few companies that have performed well recently and could be worth exploring.
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Wisetech Global Ltd. (WTC) +97.4% YTD*
Wisetech Global’s share price has skyrocketed in the past year. Which may leave some questioning exactly what the company does. Wisetech is a leading developer and provider of software solutions to the logistics execution industry and they operate all over the world. The company aims to improve the world’s supply chain with their breakthrough logistics software. They currently have more than 50 offices globally and over 18 thousand customers using their software.
Wisetech’s biggest subsidiary is Cargowise which is the end-to-end logistic software that is designed specifically for moving freight. However, Wisetech have many other business including: ABM Data Systems, CargoIT and Bysoft.
Wisetech had a good year in FY21 reporting a total revenue increase, compared to the previous year, of 18% and an 41% increase in EBITDA (Earnings before interest, tax, depreciation and amortization). EBITDA is typically seen as a better indicator of the company’s profits.
Technology One Ltd (TNE) +48.84 YTD*
Another software company, Technology One specialises in providing businesses with a way to interact with their customers and communities from any device, anywhere, at any time. The company released its first product, FinanceOne in 1991 and floated on the ASX in 1997. Today, the company has offices in Asia, New Zealand and in the UK.
Technology One boasts investing heavily, around 20% of profits, in research and development with the mission to keep innovating. The company also reported a 19% growth in profits in FY21 compared to the previous year. For the same period the company also reported an annual recurring revenue (ARR) increase of 43%.
Computershare (CPU) +42.01% YTD*
Computershare is one of Australia’s first technology companies, founded in Melbourne in 1978 and listing on the ASX in 1994. Originally a share registry business, it has grown to encompass a number of other listing and shareholder related services, but more recently, it has expanded into trust and agency services via the acquisition of Wells Fargo’s US Corporate Trust business in March this year.
The business was on track for its fifth straight year of solid earnings growth prior to the COVID19 pandemic which negatively impacted the number of new listings on major stock exchanges. The other major drawback of the pandemic on Computershare’s business recorded low-interest rates which were used as a tool by central banks to jump-start the global economy.
Computershare acts as a conduit between the companies it provides issuer services to and the shareholders of those companies. When one of Computershare’s clients pays a dividend, for a small period, this cash passes through Computershare’s accounts before being distributed to the client’s shareholders. In that window, Computershare earns interest on the cash, which it classifies as margin income (MI). Because of the plunge in interest rates in the wake of the pandemic, FY20 saw Computershare record its worst MI yield in the company’s long history.
While interest rates are still very low, Computershares did report that the second half of 2021 earnings were 39% higher than its first-half earnings. And, while there was a dip in the company’s share price in 2020, it’s has been travelling in a upward trajectory since.
Thinking of investing?
These are just five of a number of ASX-listed technology shares. Assessing the business behind the shares you are buying with a long term outlook is imperative. As always, you should do your own research to ensure investment in any of these companies suits your own individual needs. Remember that past performance is not an indicator of future performance.
*Figured correct as of 12 January, 2022
Originally authored by Carl Capolingua
Cover image source: jamesteohart/Shutterstock.com
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