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.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.