Pushpay Ltd (ASX: PPH) shares, a company I first recommended for Rask Invest members back in December 2018 (at a price of $3.10), ended Thursday’s ASX trading session over 10% higher.
One day. 19% higher.
Yet again the share price catalyst was a huge positive ‘surprise’ in revenue, free cash flow and market potential.
In an update to Rask Invest members last week I wrote:
“Like splashing a bowl of cold water on your sibling’s face while they sleep, Australian investors have finally woken up to Pushpay’s long-run potential.”
“…at risk of sounding egotistical, this latest positive round of financial results from Pushpay was largely expected by us. We have written at length about Pushpay’s potential and scale. I even made it the case study of our Value Investor Program so our students and members who took the program could see exactly what we’ve been seeing for years.”
(Please note: I’ve left out the final part of the paragraph. It’s reserved for Rask Invest members only.)
When I put a buy rating on the church software business for Rask Invest, I released a valuation on its shares suggesting that I thought it was worth around $3.60. It wasn’t much upside for a growth investor like me.
In fact, the raw upside to my intrinsic valuation was definitely not as much as I usually jump to for companies inside our investment research service. That said, two years ago Pushpay was in its infancy and still had a lot of work to do to prove itself.
Fast-forward to now, though, and it seems our patience is beginning to be extremely well rewarded.
I never judge a company’s performance by its share price. I’ll leave that to the novices. The real reasons Pushpay shares have rallied so fast and so high in just two years can be put down to the company’s scalability, stickiness, best-in-class products and management’s execution.
Since its 2016 financial year, Pushpay’s revenue has exploded higher. From around $10 million to $127 million — a 12-fold increase.
Today, we uploaded our brand-new updated report on Pushpay shares, including my latest valuations and forecasts.
Is Pushpay still a buy?
With the company’s share price up nearly 20% in a day — and 34% in one month — I think it’s right to question whether or not Pushpay is still undervalued. For example, what happens if you buy shares at over $5 but the shares are only worth $4?
Rask Invest members who pay us the low fee of $399 can access all of our stock updates, my latest Pushpay investment rating, my valuation material, plus a mountain of other members-only content (share ideas, ETF research, Q&A, videos, podcasts, downloads, you name it.).
My full investment report is reserved for our members (or you, if you join today).
However, what I can reveal to you here and now is this:
- Many investors would say Pushpay remains a higher-risk stock.
- At the same time, the business is arguably one of the highest-quality technology companies on the ASX. It’s in my top 10 picks.
- Our analyst research estimates there are over 200,000 potential customers for Pushpay’s software.
Given that most Rask readers know we always disclose our stock holdings at the bottom of our emails: you should know, I still own my Pushpay shares.
Alongside many other great technology companies and some ETFs which are currently inside Rask Invest, I haven’t sold a single share of Pushpay since I started the service.
How I’d include Pushpay shares in a diversified portfolio
As you know, I like to build the ‘core’ of my portfolio using ETFs. Then I throw in my highest conviction share ideas. Mostly they are rapidly-growing technology, industrial and healthcare companies which I hope are capable of growing 5x or more over a decade.
Of course, we’ll get plenty of our ‘best ideas’ wrong — even if Rask Invest’s performance says otherwise — but that’s perfectly ok with me.
Studies have shown that around 4% of stocks produce all of the excess returns on the stock market. Sometimes, when you’re looking for rockets, things won’t go according to plan.
Occasionally, a company you thought was in the 4% was in the 96%. I believe the more research you do, the better your chances of finding the 4%.
And if you want to achieve ultimate success as a long-term investor, I think there’s no point wasting time on mediocre companies. Just build a low-cost core portfolio then add 10-20 of the very best shares you can find (note: this can take a few years), then hold on.
Surprisingly, when you’re early in a company like Pushpay, holding onto the shares can be the hardest part. But if it were easy, every investor would do it.
If your investment philosophy is similar to mine — meaning you are willing to buy and hold only the very best shares you can find — you know where to go.
It’s only $399 to join Rask Invest for the first six months, then $199 for every six month period that you choose you stay with us. And you can cancel anytime.
But with 10 stocks on our Rask Invest scorecard right now, more on the way plus heaps of extra stock market coverage and research, I’m confident just one our ideas justify the membership fee.