The Share Price of Appen has been crushed 74% earlier this year, so we take a look to see if it’s worth a monumental Investment.
Appen Limited ASX Share Price
The share price of Appen has been absolutely obliterated as of late. The price fell from a high of $43 down to a new 52-week low of $10.96. This represents a massive 75% fall in the stock price since August 2020.
With Appen set to hold its Annual General Meeting on 28th May it’s worth taking a look to see if there may be some relief coming in the short term.
Appen Analysis Share Price Fundamentals
From the FY2020 Annual Report, Appen is still accelerating revenue growth at a rate of 49% CAGR and EBIDTA at a rate of 51%. This is massive by any means. Although the company has flagged a slowdown due to COVID-related factors and the switch of the consumer this is still expected to be approx ~20% in FY2021. See the Previous Article
Our Focus for Appen Limited is China Growth:
Appen (APX.ASX) seems to be growing massively in China +60% QoQ according to their 2020 Investor Presentation.
Whilst revenue growth is off an extremely low base it’s worth considering that this has added an additional 6.7m revenue in the year. At the current growth rate and considering no political escalation, we expect this to grow to $10 million this year.
At $10 million a year, we believe China’s revenue alone should be worth at least $1 to the stock price.
Appen Analysis: What About Current Assets:
Appen holds $78 million in cash on hand on their balance sheet. This equates to approx. $0.63/share in cash balance. Net Assets are listed at 485million or $3.94/share.
Appen Limited Existing Business
In the FY2020 presentation, revenue growth has lifted up 12%, with growth largely driven by an increase in existing and new Relevance projects with existing customers. Growth has been impacted by major customer’s responses to COVID-19 and the strong AUD in H2 FY2020. Prophet expects the AUD strength to decrease against the greenback into H2 2021. This has the potential to add up to 6-10million to the bottom line. This would deliver a ~6% increase to the EBIDTA.
Based on FY2020 earnings the company is trading on a PE currently of 12x. We believe this is massively cheap for such a high-growth stock.
We can see Appen’s FY2021 earnings being between 126-136million. This would represent a ~20% increase to the bottom line.
Appen Limited: Prophets Take
Prophet has been buying shares of Appen on market at the current price. Check out our portfolio here.
Please Remember all Articles Published on Prophet Invest are Opinion Only
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