Contract Wins With Nippon Express And LOGISTEED Will Expand Global Logistics Reach

Key Takeaways

• Strategic acquisitions and new product rollouts are projected to enhance market presence, drive revenue growth, and broaden customer adoption.
  
• Cost efficiency initiatives and increased R&D investment are expected to improve profitability, bolster long-term earnings, and enhance market competitiveness.
  
• Strategic acquisitions and new product launches bring integration and execution risks, potentially disrupting operations and affecting margins despite growth ambitions.

Catalysts

Engages in the development and provision of software solutions to the logistics execution industry in the Americas, the Asia Pacific, Europe, the Middle East, and Africa.

• WiseTech Global's strategic acquisitions, including BSM Global and Singeste, contribute to expanding its market presence and product capabilities, potentially leading to increased revenue through broader customer adoption and integration synergies.
  
• The rollout of new breakthrough products like ComplianceWise and CargoWise Next, along with Container Transport Optimization expected in 2H FY '25, is anticipated to drive future revenue growth as these innovations enhance value for global logistics customers.
  
• The company's successful cost efficiency program, exceeding $33 million in savings, and the integration of previous acquisitions like Envase and Blume enhancing profitability, are expected to improve net margins through continued operational efficiencies.
  
• Increasing investment in R&D, making up 36% of revenue, supports the ongoing development of the CargoWise platform and other innovative solutions, which can bolster long-term earnings growth through product expansion and enhanced market competitiveness.
  
• The revenue boost from recent contract wins with large global freight forwarders, such as Nippon Express and LOGISTEED, is expected to drive organic revenue growth, supported by low customer attrition and the scalability of ongoing global freight forwarder rollouts.

WiseTech Global Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming WiseTech Global's revenue will grow by 26.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 27.5% today to 33.7% in 3 years time.
• Analysts expect earnings to reach $477.4 million (and earnings per share of $1.47) by about March 2028, up from $191.9 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 80.5x on those 2028 earnings, down from 90.7x today. This future PE is greater than the current PE for the AU Software industry at 58.6x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.36%, as per the Simply Wall St company report.

WiseTech Global Future Earnings Per Share Growth

Risks

• The change in functional and presentational currency to U.S. dollars from Australian dollars introduces foreign exchange risk, which could impact revenue and net earnings if the U.S. dollar fluctuates significantly.
  
• Strategic acquisitions, while aimed at growth, bring integration risks and potential disruptions, affecting operational efficiency and potentially increasing costs or reducing profit margins.
  
• There is execution risk involved in launching the new products ComplianceWise, CargoWise Next, and Container Transport Optimization, which may delay anticipated revenue contributions or lead to higher-than-expected R&D spending, impacting net margins.
  
• Continued heavy investment in R&D (36% of revenue) increases costs, and while it aims to drive future growth, there is a risk it may not proportionately translate into increased revenue or market share gains.
  
• Operating expenses rising due to factors like litigation defense costs and operational investments could negatively affect net margins if not matched by proportional revenue growth.

Valuation

• The analysts have a consensus price target of A$120.695 for WiseTech Global based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$152.7, and the most bearish reporting a price target of just A$95.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.4 billion, earnings will come to $477.4 million, and it would be trading on a PE ratio of 80.5x, assuming you use a discount rate of 7.4%.
• Given the current share price of A$82.81, the analyst price target of A$120.7 is 31.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.