ASX:XRO

Stock Analysis Report

Executive Summary

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


Snowflake Analysis

Exceptional growth potential with mediocre balance sheet.


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 has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

1.8%

XRO

0.1%

AU Software

0.8%

AU Market


1 Year Return

84.3%

XRO

35.8%

AU Software

15.3%

AU Market

Return vs Industry: XRO exceeded the Australian Software industry which returned 35.8% over the past year.

Return vs Market: XRO exceeded the Australian Market which returned 15.3% over the past year.


Shareholder returns

XROIndustryMarket
7 Day1.8%0.1%0.8%
30 Day4.5%4.0%0.3%
90 Day14.2%9.1%5.3%
1 Year84.3%84.3%37.0%35.8%20.5%15.3%
3 Year414.5%414.5%171.9%159.7%37.4%18.8%
5 Year293.8%293.8%181.4%159.8%50.7%16.8%

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?

4738.15x

Price to Earnings (PE) ratio


Share Price vs. Fair Value

Below Fair Value: XRO (A$89) is trading above our estimate of fair value (A$20.8)

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 (4738.2x) compared to the Software industry average (36.7x).

PE vs Market: XRO is poor value based on its PE Ratio (4738.2x) compared to the Australian market (18.8x).


Price to Earnings Growth Ratio

PEG Ratio: XRO is poor value based on its PEG Ratio (83.9x)


Price to Book Ratio

PB vs Industry: XRO is overvalued based on its PB Ratio (34.6x) compared to the AU Software industry average (4.1x).


Next Steps

Future Growth

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

56.4%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: XRO's forecast earnings growth (56.4% per year) is above the savings rate (1.1%).

Earnings vs Market: XRO's earnings (56.4% per year) are forecast to grow faster than the Australian market (9.4% per year).

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

Revenue vs Market: XRO's revenue (22.8% per year) is forecast to grow faster than the Australian market (4.2% per year).

High Growth Revenue: XRO's revenue (22.8% per year) is forecast to grow faster than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: XRO's Return on Equity is forecast to be high in 3 years time (23.7%)


Next Steps

Past Performance

How has Xero performed over the past 5 years?

25.6%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: XRO has a large one-off loss of NZ$3.2M impacting its September 30 2019 financial results.

Growing Profit Margin: XRO became profitable in the past.


Past Earnings Growth Analysis

Earnings Trend: XRO has become profitable over the past 5 years, growing earnings by 25.6% per year.

Accelerating Growth: XRO has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: XRO has become profitable in the last year, making it difficult to compare its past year earnings growth to the Software industry (22%).


Return on Equity

High ROE: XRO's Return on Equity (0.7%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Xero's financial position?


Financial Position Analysis

Short Term Liabilities: XRO's short term assets (NZ$646.4M) exceed its short term liabilities (NZ$115.4M).

Long Term Liabilities: XRO's short term assets (NZ$646.4M) exceed its long term liabilities (NZ$564.9M).


Debt to Equity History and Analysis

Debt Level: XRO's debt to equity ratio (103.9%) is considered high.

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


Balance Sheet

Inventory Level: XRO has a low level of unsold assets or inventory.

Debt Coverage by Assets: XRO's debt is covered by short term assets (assets are 1.6x debt).


Cash Runway Analysis

For companies that have on average been loss making in the past we assess whether they have at least 1 year of cash runway.

Stable Cash Runway: XRO is profitable, therefore cash runway is not a concern.

Forecast Cash Runway: XRO is profitable, therefore cash runway is not a concern.


Next Steps

Dividend

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

0.024%

Forecast Dividend Yield


Dividend Yield vs Market

companyn/amarketbottom25%2.3%markettop25%5.5%industryaverage1.1%forecastin3Years0.02%

Current dividend yield vs market & industry

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

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

2.0yrs

Average management tenure


CEO

Steve Vamos (61yo)

1.8yrs

Tenure

NZ$1,068,000

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 ($USD682.56K) is below average for companies of similar size in the Australian market ($USD2.86M).

Compensation vs Earnings: Insufficient data to compare Steve's compensation with company performance.


Leadership Team

NamePositionTenureCompensationOwnership
Steven Vamos
Chief Executive Officer1.8yrsNZ$1.07m0.0071% NZ$890.2k
Rod Drury
Founder & Non-Executive Director13.6yrsno data11.13% NZ$1.4b
Kirsty Godfrey-Billy
Chief Financial Officer1.3yrsNZ$692.00k0.0027% NZ$340.8k
Mark Rees
Chief Technology Officer2.1yrsno datano data
Chaman Sidhu
Chief Legal Officer & Company Secretary3.3yrsno datano data
Damien Tampling
Chief Strategy & Corporate Development Officer0yrsno datano data
Nicole Reid
Acting Chief People Officer0.3yrsno datano data
Gary Turner
Managing Director of United Kingdom & EMEA10.6yrsno datano data
Anne Allen
Head of People Experience - UK6.3yrsno datano data
Anna Curzon
Chief Product Officer1.4yrsno datano data

2.0yrs

Average Tenure

Experienced Management: XRO's management team is not considered experienced ( 2 years average tenure), which suggests a new team.


Board Members

NamePositionTenureCompensationOwnership
Rod Drury
Founder & Non-Executive Director13.6yrsno data11.13% NZ$1.4b
Graham Smith
Independent Director5yrsNZ$460.00kno data
David Thodey
Independent Non-Executive Chairman0yrsno data0.0028% NZ$355.8k
Andrew Winkler
Non-Executive Director10.8yrsNZ$90.00k6.57% NZ$825.6m
Dale Murray
Independent Non-Executive Director1.8yrsNZ$111.00k0.00067% NZ$84.2k
Susan Peterson
Independent Non-Executive Director3yrsNZ$90.00k0.0019% NZ$233.9k
Lee Hatton
Independent Non-Executive Director5.8yrsNZ$110.00k0.0066% NZ$834.9k

5.4yrs

Average Tenure

Experienced Board: XRO's board of directors are considered experienced (5.4 years average tenure).


Ownership

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


Insider Trading Volume

Insider Buying: Insufficient data to determine if 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 2.4%.


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$12.574b
  • Shares outstanding: 141.28m
  • Website: https://www.xero.com

Number of Employees


Location

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

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
XROL.FOTCPK (Pink Sheets LLC)YesOrdinary SharesUSUSDJun 2007
XROASX (Australian Securities Exchange)YesOrdinary SharesAUAUDJun 2007
XROCHIA (Chi-X Australia)YesOrdinary SharesAUAUDJun 2007
0XEDB (Deutsche Boerse AG)YesOrdinary SharesDEEURJun 2007

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 advisors. It also provides Xero mobile app; and accountant/bookkeeper tools, including Xero HQ, Xero Practice Manager, Xero Workpapers, and Xero Cashbook/Ledger. The company serves various businesses, such as retail, high tech, non-profit, legal, Amazon sellers, hospitality, cafés, startups, construction, creatives, e-commerce, small business, healthcare, farming, manufacturing, tourism, real estate, and franchises. Xero Limited was founded in 2006 and is headquartered in Wellington, New Zealand. 


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2020/02/19 10:39
End of Day Share Price2020/02/19 00:00
Earnings2019/09/30
Annual Earnings2019/03/31


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.