WiseTech's latest bolt-on is another reminder of the risks with their acquisition fuelled strategy.
While there's definite strategic value in strengthening the network and acquiring customers, the prices being paid are quite staggering.
This latest acquisition in SISA will cost as much as $24m, but is only generating $12m in revenue and 500k in EBITDA. 2x sales for a low margin business! They'll no doubt cut out some costs and improve efficiency, but still!
Adding Wistech to my Scorecard today.
I am almost certainly jumping in too soon here. But I know I have no skill at timing the market, and am simply being informed by the fact that shares are now ~10% below my estimate of intrinsic value.
If I had been given the chance to buy shares at ~$16.5 a month or two ago, I would have jumped at the chance. Nothing fundamental has changed since then -- only market sentiment.
Would not be surprised to see shares drop a lot further, after all they are still on a forward PE of 84! But if they do, i'd be tempted to add another position to my scorecard. Somehow, I think that in 2025 I wont care that I didnt get the best possible entry point :)
Thanks for the great Straws Bear77.
Just a small technical note, you can create multiple Straws under the same Hashtag, which hopefully keeps things a bit 'cleaner' and helps keep various perspectives more sensibly grouped.
Someone help me out -- I simply can't get my head around WiseTech's valuation.
Take the consensus EPS forecast for 2020 (25cps), which is almost double what it will earn this year. Let's double it again and give it a PE of 40 (yes, 40!). That gives a share priuce of $20 in two years time, which gives a 8.5% annual return between then and now (exc. dividends).
Maybe i'm underestimating the longer term growth potential, or what the market will be willing to pay...