Afterpay: An interactive valuation
Introduction
Growth at a reasonable price. That's the name of the investing thesis made famous by legendary investor, Peter Lynch. Put simply, it is an investment strategy that seeks out companies that are growing their earnings while not trading at an overly high valuation.
Unfortunately for Australian investors, growing ASX-listed companies are seemingly always trading at tremendous valuations.
In March, COVID caused a pull back in stock prices across the board. For some companies this seemed fair as earnings were about to take a hit, whereas for others, COVID's impact may be negligible or even accelarate growth.
We've put together a simple, interactive piece of research to help compare 10 of the ASX's most popular growth stocks, seeking out those at a reasonable price as a result of COVID. We've chosen to incude all of the 'WAAAX' tech stocks (WiseTech, Appen, Afterpay, Altium and Xero) as well as EML Payments, Zip Co, ELMO Software and Megaport.
How it works
We have scored each of the companies based on the following:
1) The discount (or premium) to their share-price high pre-COVID
2) Our analysts view on COVIDs impact on their business going forward.
The underlying data from our analysis is summarised in the table below:
All you need to do is decide what is most important - the discount (if any) on offer, the impact of COVID on future earnings or a blend of both?
This slider will pin to the top of your screen. Slide it left to rank based on share price discount, or right to rank based on COVID impact.
Rankings
Summary
The rankings above summarise which company has the most favourable future outlook based on our calculations and your weighting of importance. Hover over the companies to see some extra commentary (or tap if you are on mobile!)
We gathered data on each of the 9 companies featured. Our 'latest share price' uses 20 minute delayed share price data. We calculated the discount (or premium) to the share price high pre-COVID (i.e pre-March, 2020).*A
Our analysts reviewed each of the companies publically avaliable data to determine a qualitative 'COVID score' - which rates the the likely impact of COVID on the companies future growth. The COVID score is out of 100, with 100 indicating the lowest impact relative to peers. *B
A calculation is then run to weigh both A* and B*, based on the readers input, to determine an overall ranking for each of the 9 companies, with a high ranking indicating a favourable future outlook.
This article should be read for general information only and should not be taken as financial advice. All enquiries to mharper@moderninvestor.com.au
