Xero Limited (XRO) offers an online accounting system which sits between accountants and small to medium business as an accounting ledger with real-time reconciliation.
| Key Statistics | |||||||
| 52-Week Range | Avg. Daily Vol (3 Mo) | Market Value | Dividend Yield | Float % | Target Price | Consensus Rating (5 strong buy – 1 strong sell) |
Next Earnings Announcement |
| 54.69 – 120 | 591,980 | 16,955.90 | – | 82.2% | 86.73 | 2.82 | 12/11/2020 |
The software features bank transaction importing, a cash book, general ledger, invoicing, account receivable, accounts payable, financial reporting and management of expense claims. The business model is based on software as a service (SaaS) with the cloud-based software sold by subscription based on the number of companies and is sold in over 180 countries.
Xero is attractive for both accountants and small to medium business, offering convenience by simplifying processing for clients, with heavy investment in automation providing regular updates to the software every four to six weeks. The platform provides support across numerous currencies and tax rates, making it appealing globally, and connects with a variety of business applications.
Revenue is primarily generated by monthly subscriptions for the software with supplemental revenue derived from non-subscription services such as fintech products including customer referrals, conferences and events. In the year ended March 2020, 45% of revenue was generated from Australian sales, following closely by the United Kingdom with 25%, New Zealand at 16%, North America at 8% and 6% from other nations. For the year ended March 2021 revenue is forecast to rise 19.1% to $855.57 million and rising further in 2022 to $1,014 million. Earnings per share for the trailing 12-months was $0.02 per share, forecast to increase to $0.207 in 2021 and $0.472 in 2022 that would see the stock trading on forward P/E multiples of 615.1 and 269.8 respectively.
The stock recently rose to new-all time highs in October $119.88 after announcing plans to acquire Waddle, an Australian invoice finance provider. While Waddle has been integrated with Xero since 2016 CEO Steve Wamos noted it was an important step to growth the small business platform, helping customer manage cashflow and access capital. Waddle’s lending platform will also allow fintech’s and other lenders to support small business financial needs.
The average target price of analysts covering the stock is $86.73 with 35% of analysts rating the stock as a buy, compared to 24% as a sell and 41% as a hold.
