Xero deep in overvalued territory (XRO)

From Morningstar today:

“Cloud-based accounting software firm Xero has booked a strong result but the WAAAX club member remains deep in overvalued territory, says Morningstar.

Xero this week reported a solid first half 2019 result, which included a 36 per cent boost in revenue and a 31 per cent jump in subscriber numbers.

But still, 2019 marks the 11th consecutive year of losses for Xero, which is a member of the so-called Australian tech stock club, known as the WAAAX, which include WiseTech, Afterpay, Altium, and Appen…..”

This supports our view, from January 2019:

“We consider Xero Limited (XRO) to be over-priced and recommend waiting until market price aligns with fair value.”

Xero is currently priced at $60.14, whereas our estimate of fair value, from January 2019, is $31.75, based on a 10-year payback period.