Appen Share Price Trading at Massive Multiple after Strong Run

The share price of Appen Ltd [ASX:APX] is down .89% today at time of writing, trading at $36.85.

You can see the APX share price went on a strong run from the March market lows:

ASX APX Share Price Chart - Appen Shares ASX

Source: tradingview.com

In a 12-month window Appen shares are up more than 40%, we take a quick look at whether the run can continue.

APX share price may retrace

The APX share price reflects the broader theme in the market where tech leaders are advancing relative to their peers.

But the APX share price may begin a brief retracement as its P/E ratio now stands at a whopping 100-plus.

Even by tech stock standards this is quite high.

That being said, the Afterpay Ltd [ASX:APT] share price shows that you don’t even need an earnings multiple to surge up the charts.

But Appen is a different kettle of fish compared to the fintech darling.

It’s a kind of ‘AI infrastructure’ stock that feeds off the success of the Silicon Valley giants.

It’s growing company that has a dominant position in a niche market.

As such, its growth trajectory may be more bounded than APT.

Outlook for APX share price

With its next results due out in a couple weeks on 27 August, it will be very interesting to see whether the APX share price run was justified.

Expectations around APX are high.

You can see a glimpse of its financials and forward estimates below:

ASX APX Financials - Appen Shares

Source: MarketScreener

As you can see, things are projected to improve for the company across a number of balance sheet metrics.

Increasing net cash position and improving Return on Equity.

If the analysts are right about these things, the dividend pay-out ratio could improve over the coming years.

Of course, there are always risks, particularly in the tech world.

Competitors, or improving AI could mean the human leg work that APX provides may become less relevant.

For now, the outlook for the APX share price is strong if these numbers are anything to go by.

Regards,

Lachlann Tierney,
For Money Morning

PS: Missed out on the APX run? Check out these four small-caps that were selected for their ability to thrive off lockdown mega-trends. Download your copy of the report for free right here.


Lachlann Tierney is a writer for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:


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