ASX:XRO

Stock Analysis Report

NOT FOR DISTRIBUTION
Header cover image

Market Cap

AU$20.8b

Last Updated

2021/08/02 08:06 UTC

Data Sources

Company Financials +

Executive Summary

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


Snowflake Analysis

Reasonable growth potential with proven track record.


Similar Companies

Share Price & News

How has Xero's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: XRO is not significantly more volatile than the rest of Australian stocks over the past 3 months, typically moving +/- 6% a week.

Volatility Over Time: XRO's weekly volatility (6%) has been stable over the past year.


Market Performance


7 Day Return

-1.1%

XRO

-0.9%

AU Software

-0.1%

AU Market


1 Year Return

55.0%

XRO

35.1%

AU Software

27.3%

AU Market

Return vs Industry: XRO exceeded the Australian Software industry which returned 35.1% over the past year.

Return vs Market: XRO exceeded the Australian Market which returned 27.3% over the past year.


Shareholder returns

XROIndustryMarket
7 Day-1.1%-0.9%-0.1%
30 Day3.4%0.3%0.9%
90 Day3.4%3.1%4.5%
1 Year55.0%55.0%36.1%35.1%31.9%27.3%
3 Year226.3%226.3%101.2%95.6%32.7%16.8%
5 Year645.4%645.4%227.7%207.5%62.5%31.0%

Long-Term Price Volatility Vs. Market

How volatile is Xero's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

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

1086.55x

Price to Earnings (PE) ratio


Share Price vs. Fair Value

Below Fair Value: XRO (A$142.22) is trading above our estimate of fair value (A$65.35)

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 (1086.6x) compared to the Australian Software industry average (29.7x).

PE vs Market: XRO is poor value based on its PE Ratio (1086.6x) compared to the Australian market (20.5x).


Price to Earnings Growth Ratio

PEG Ratio: XRO is poor value based on its PEG Ratio (30.5x)


Price to Book Ratio

PB vs Industry: XRO is overvalued based on its PB Ratio (29.5x) compared to the AU Software industry average (4.7x).


Future Growth

How is Xero forecast to perform in the next 1 to 3 years based on estimates from 12 analysts?

35.7%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: XRO's forecast earnings growth (35.7% per year) is above the savings rate (1.9%).

Earnings vs Market: XRO's earnings (35.7% per year) are forecast to grow faster than the Australian market (13.6% per year).

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

Revenue vs Market: XRO's revenue (17.5% per year) is forecast to grow faster than the Australian market (5.3% per year).

High Growth Revenue: XRO's revenue (17.5% 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 (15%).


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 32.9%.


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?

0.031%

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

Management

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

3.1yrs

Average management tenure


CEO

Steve Vamos (63 yo)

3.33yrs

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 ($USD1.75M) is below average for companies of similar size in the Australian market ($USD3.27M).

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 (3.1 years average tenure).


Board Members

Experienced Board: XRO's board of directors are considered experienced (3.9 years average tenure).


Ownership

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


Insider Trading Volume

Insider Buying: XRO insiders have bought more shares than they have sold 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 4.5%.


Top Shareholders

Company Information

Xero Limited's company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Xero Limited
  • Ticker: XRO
  • Exchange: ASX
  • Founded: 2006
  • Industry: Application Software
  • Sector: Software
  • Market Cap: AU$20.795b
  • Shares outstanding: 148.24m
  • Website: https://www.xero.com

Number of Employees


Location

  • Xero Limited
  • XERO ONE
  • 19-23 Taranaki Street
  • Wellington
  • 6011
  • New Zealand

Listings


Biography

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 advis...


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2021/08/02 08:06
End of Day Share Price2021/08/02 00:00
Earnings2021/03/31
Annual Earnings2021/03/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.