Xero Ltd
(ASX: XRO) Share Price and News
Key Statistics
About Xero
Xero is a Cloud software company helping businesses do business. The company, which has over 3 million subscribers, primarily sells accounting software that helps businesses keep books, pay bills and send invoices. But it has gradually developed features useful beyond book-keeping, such as storing files, converting currencies, keeping track of inventories and creating professional quotes.
Xero Company History
Xero’s journey began in 2006 in New Zealand, under the vision of Rod Drury and Hamish Edwards, with an initial focus on revolutionizing bookkeeping through cloud-based solutions. The company quickly gained momentum, first going public on the New Zealand Stock Exchange in 2007, only to dual-list on the ASX in 2012 and then be solely ASX-listed in 2018.
Rod Drury recently stood down and the CEO’s seat being taken by Sukhinder Singh Cassidy, who started in February 2023. One telling sign that the company is moving forward is that Ms Cassidy is based in San Francisco rather than Wellington or Sydney, a sign that it is becoming a truly global player. Indeed its non-ANZ revenues are now growing stronger than its ANZ revenues and the average revenue per user was higher.
Future Outlook of Xero (ASX: XRO)
Xero has a bright future. The company is aiming to double its size in the next few years, claiming to have a TAM (Total Addressable Market) ofNZ$100bn and that is just the top 3 jobs its software is used for – Accounting, Payroll and Payments. Adjacent Tasks, including other tasks such as inventory, CRM and project management, could be another $39bn.
So far as specific guidance for its FY24 results are concerned, it only gave these 3 points. First, reiterrating its existing FY24 guidance it told investors it is targeting an operating expense to operating revenue ratio of around 75%, which would be an improved margin compared to FY23. Second, staying within the so-called Rule of 40. This states that if an SaaS company’s revenue growth rate is added to its profit margin, the combined value should exceed 40%. And third, the above goal of doubling revenues – it wasn’t clear what time frame, although presumably by the end of FY27, given the presentation’s focus was FY25-FY27.
Is Xero (ASX: XRO) a Good Stock to Buy?
Xero is a good stock to buy. It has a dominant position in its market and is very important to its customers. Consensus estimates expect the company can grow its revenues and profit significantly over the next 4 years. And even though some multiples (particularly P/E) may appear high right now, others are more reasonable (i.e. is EV/EBITDA is 33.8x for FY25) will be worth it if it can achieve its growth.
Our Stock Analysis
Frequently Asked Questions
What is Xero Limited?Xero Limited is a dynamic tech company from New Zealand, specializing in cloud-based accounting software for small businesses. Founded in 2006, it simplifies financial management with tools like invoicing, payroll, and bank reconciliation, making it a go-to choice for entrepreneurs worldwide.
How has Xero’s stock performed recently?Xero’s stock has shown remarkable performance, with a 56% rise in the past year and a 172% increase over five years. This growth reflects investor confidence in Xero’s innovative approach to cloud accounting and its expanding market presence.
What makes Xero’s software unique?Xero’s cloud-based software stands out for its user-friendly design and comprehensive features. It helps small businesses manage finances efficiently, offering invoicing, expense tracking, payroll management, and real-time bank reconciliation, all accessible from any device.
What is Xero’s market presence like?Xero boasts a strong market presence, especially in Australia, New Zealand, the UK, and North America. It’s rapidly growing in other regions like South Africa, and its consistent subscriber growth highlights its global appeal as a top cloud accounting software provider.
Is Xero a good investment choice?Xero presents a strong investment case with its steady share price growth, high gross profit margin, and increasing revenue. Its ability to grow its subscriber base and ARPU suggests a solid business model. Despite fluctuations, its market position and expansion plans make it an attractive tech sector investment.