Xero (ASX:XRO) - Share price, News & Analysis

XRO fundamental analysis
Snowflake Score
Valuation	0/6
Future Growth	4/6
Past Performance	4/6
Financial Health	3/6
Dividends	0/6

XRO Overview

Xero Limited, together with its subsidiaries, operates as a software as a service company worldwide.

Rewards

Earnings are forecast to grow 34.85% per year

Earnings grew by 500.7% over the past year

Risk Analysis

Interest payments are not well covered by earnings

Large one-off items impacting financial results

Significant insider selling over the past 3 months

Shareholders have been diluted in the past year

Xero Competitors

Technology One

ASX:TNE

AU$3.8b

ReadyTech Holdings

ASX:RDY

AU$380.7m

salesforce.com

NYSE:CRM

US$279.6b

Intuit

NasdaqGS:INTU

US$157.8b

Price History & Performance

Summary of all time highs, changes and price drops for Xero
Historical stock prices
Current Share Price	AU$149.95
52 Week High	AU$98.78
52 Week Low	AU$157.99
Beta	0.93
1 Month Change	-0.30%
3 Month Change	9.37%
1 Year Change	47.92%
3 Year Change	200.14%
5 Year Change	704.45%
Change since IPO	3,247.10%

Shareholder Returns

	XRO	AU Software	AU Market
7D	1.5%	-1.2%	-0.8%
1Y	47.9%	42.6%	25.3%

Return vs Industry: XRO exceeded the Australian Software industry which returned 42.6% over the past year.

Return vs Market: XRO exceeded the Australian Market which returned 25.3% over the past year.

Price Volatility

Is XRO's price volatile compared to industry and market?
XRO volatility
XRO Beta	0.93
Industry Beta	0.85
Market Beta	1

Stable Share Price: XRO is less volatile than 75% of Australian stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: XRO's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
2006	3,642	Steve Vamos	https://www.xero.com

Xero Limited, together with its subsidiaries, operates as a software as a service company worldwide. The company offers Xero, a cloud-based accounting software that connects small businesses to their advisors. It also provides Xero mobile app; and accountant/bookkeeper tools, including Xero HQ, Xero Cashbook or Xero Ledger, Xero Practice Manager, Xero Workpapers, and Xero tax tools.

Xero Fundamentals Summary

How do Xero's earnings and revenue compare to its market cap?
XRO fundamental statistics
Market Cap	NZ$23.04b
Earnings (TTM)	NZ$19.77m
Revenue (TTM)	NZ$848.78m

1.2kx

P/E Ratio

27.1x

P/S Ratio

Is XRO overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
XRO income statement (TTM)
Revenue	NZ$848.78m
Cost of Revenue	NZ$118.89m
Gross Profit	NZ$729.89m
Expenses	NZ$710.12m
Earnings	NZ$19.77m

Last Reported Earnings

Mar 31, 2021

Next Earnings Date

Nov 11, 2021

Earnings per share (EPS)	0.13
Gross Margin	85.99%
Net Profit Margin	2.33%
Debt/Equity Ratio	114.8%

How did XRO perform over the long term?

See historical performance and comparison

Valuation

Is Xero undervalued compared to its fair value and its price relative to the market?

1165.32x

Price to Earnings (PE) ratio

Share Price vs. Fair Value

Below Fair Value: XRO (A$149.95) is trading above our estimate of fair value (A$66.12)

Significantly Below Fair Value: XRO is trading above our estimate of fair value.

Price To Earnings Ratio

PE vs Industry: XRO is poor value based on its PE Ratio (1165.3x) compared to the Australian Software industry average (45.1x).

PE vs Market: XRO is poor value based on its PE Ratio (1165.3x) compared to the Australian market (19.1x).

Price to Earnings Growth Ratio

PEG Ratio: XRO is poor value based on its PEG Ratio (33.4x)

Price to Book Ratio

PB vs Industry: XRO is overvalued based on its PB Ratio (30.9x) compared to the AU Software industry average (5x).

Future Growth

How is Xero forecast to perform in the next 1 to 3 years based on estimates from 13 analysts?

34.8%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: XRO's forecast earnings growth (34.8% per year) is above the savings rate (1.9%).

Earnings vs Market: XRO's earnings (34.8% per year) are forecast to grow faster than the Australian market (11.9% per year).

High Growth Earnings: earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: XRO's revenue (17.8% per year) is forecast to grow faster than the Australian market (5.7% per year).

High Growth Revenue: XRO's revenue (17.8% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: XRO's Return on Equity is forecast to be low in 3 years time (14.3%).

Past Performance

How has Xero performed over the past 5 years?

63.0%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: XRO has a large one-off loss of NZ$67.2M impacting its March 31 2021 financial results.

Growing Profit Margin: XRO's current net profit margins (2.3%) are higher than last year (0.5%).

Past Earnings Growth Analysis

Earnings Trend: XRO has become profitable over the past 5 years, growing earnings by 63% per year.

Accelerating Growth: XRO's earnings growth over the past year (500.7%) exceeds its 5-year average (63% per year).

Earnings vs Industry: XRO earnings growth over the past year (500.7%) exceeded the Software industry 37.5%.

Return on Equity

High ROE: XRO's Return on Equity (2.7%) is considered low.

Financial Health

How is Xero's financial position?

Financial Position Analysis

Short Term Liabilities: XRO's short term assets (NZ$1.2B) exceed its short term liabilities (NZ$168.8M).

Long Term Liabilities: XRO's short term assets (NZ$1.2B) exceed its long term liabilities (NZ$1.1B).

Debt to Equity History and Analysis

Debt Level: XRO's debt to equity ratio (114.8%) is considered high.

Reducing Debt: Insufficient data to determine if XRO's debt to equity ratio has reduced over the past 5 years.

Debt Coverage: XRO's debt is well covered by operating cash flow (25.5%).

Interest Coverage: XRO's interest payments on its debt are not well covered by EBIT (2.2x coverage).

Balance Sheet

Dividend

What is Xero current dividend yield, its reliability and sustainability?

0.029%

Forecast Dividend Yield

Dividend Yield vs Market

Notable Dividend: Unable to evaluate XRO's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate XRO's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.

Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if XRO's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if XRO's dividend payments have been increasing.

Current Payout to Shareholders

Dividend Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.

Future Payout to Shareholders

Future Dividend Coverage: No need to calculate the sustainability of XRO's dividend in 3 years as they are not forecast to pay a notable one for the Australian market.

Next Steps

Explore strong dividend paying companies in the Software industry.

Management

How experienced are the management team and are they aligned to shareholders interests?

3.2yrs

Average management tenure

CEO

Steve Vamos (63 yo)

3.42yrs

Tenure

NZ$2,510,000

Compensation

Mr. Steven M. Vamos, also known as Steve, BEng Civil (Hons) is the Chief Executive Officer of Xero Ltd since April 1, 2018. Mr. Vamos was an Independent Non-Executive Director at Telstra Corporation Limite...

CEO Compensation Analysis

Compensation vs Market: Steve's total compensation ($USD1.76M) is below average for companies of similar size in the Australian market ($USD3.55M).

Compensation vs Earnings: Steve's compensation has increased by more than 20% in the past year.

Leadership Team

Experienced Management: XRO's management team is considered experienced (3.2 years average tenure).

Board Members

Experienced Board: XRO's board of directors are considered experienced (3.4 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: XRO insiders have only sold shares in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 4.2%.

Data	Last Updated (UTC time)
Company Analysis	2021/09/27 15:41
End of Day Share Price	2021/09/27 00:00
Earnings	2021/03/31
Annual Earnings	2021/03/31

Market Cap

7D

1Y

Updated

Data