Consensus community valuation
$74.51
Average Intrinsic Value
19.2%
Overvalued by
Active Member Straws
#Overview
Added 1 day ago

I really, really like this business.

If anyone has ever used Xero, they would understand that it is such a good piece of software and is far superior to competitors, such as MYOB...

Super expensive on first analysis, but it seems to have always been this way. It is priced to perfection and it seems really difficult to get invovled because of how xero is interpreted by the market and subsequently priced accordingly to growth forecasts.

Either way, future ROE is likely to be 20%+ in the coming years and with a superior product within the "accounting software" industry, Xero is well worth keeping an eye on.

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#Fund Manager Views
Last edited 2 months ago

25-Apr-2020:  https://www.livewiremarkets.com/wires/buy-hold-sell-5-pandemic-resistant-growth-stocks

Michelle Lopez from Aberdeen Standard Investments picked XRO as her stock that is pandemic resistant and whose earnings runway has now got even longer, and Ben Rundle from NAOS agreed with her.  The Xero (XRO) commentary starts around the 5:45 mark.

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#FY20 Annual Results
Last edited 2 months ago

14-May-2020:  Market Release - FY20 Annual Results   and   Investor Presentation - FY20 Annual Results   

and   2020 Annual Report   and   Appendix 4E - FY20 Annual Results   and   2020 Appendix 4G

Xero Delivers 30% Revenue Growth & Free Cash Flow Progress

Focus is on supporting Xero customers during COVID-19

WELLINGTON, 14 May 2020 - Xero Limited (ASX: XRO) today reports full year earnings to 31 March 2020 (FY20) delivering top-line growth with a positive free cash flow and net profit outcome.  

The effect of COVID-19 on the global business environment, and associated social distancing measures that commenced in March, fell late in FY20 and had a relatively modest impact on Xero’s operating and financial  performance for the year.  

However, the impact of COVID-19 on March trading did result in some reduction in annualised monthly recurring revenue (AMRR) progress in that month. This outcome, along with the ongoing COVID-19 environment, will be reflected in Xero’s FY21 financial performance. Xero does not anticipate significant changes to its long-term strategy, and it believes strongly in the value Xero can bring to small businesses and their advisors.  

Performance highlights FY20  (All figures in NZD as at 31 March 2020. Comparisons are made against FY19)  

  • 30% growth in operating revenue to $718.2 million (29% in constant currency (CC))  
  • 29% growth in AMRR to $820.6 million  
  • 26% growth in total subscribers to 2.285 million  
  • Rest of World and North America contributed almost one in four subscriber additions in H2 FY20  
  • Total subscriber lifetime value grew by 27% (25% in CC) to $5.5 billion  
  • Free cash flow was $27.1 million, taking total available liquid resources to $686.1 million  
  • Net profit of $3.3 million, an improvement of $30.5 million over a net loss of $27.1 million  
  • EBITDA of $137.7 million, an improvement of 88% compared to $73.2 million  

...click on links above for more...

The market seems a little underwhelmed so far with these numbers.  XRO is down a little more than the general market is today - so far.  Xero still looks like a good long term hold to me, although I don't currently hold XRO shares.  It's a very good company and they've only just become profitable with this result (on a full year basis) so plenty of growth to come yet.

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#Bull Case
Last edited 4 months ago

Great business that has always been in the 'expensive' category. Seems to rebound quickly on short lived market optimism, but now at $65 at time of writing. This makes a good inital entry point for me. Aware a recession may lead to an increase in churn.

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