WiseTech (ASX: WTC) was up 4.6% shortly after the market open today, as investors digested annual results which revealed healthy growth across the business. The company recorded revenue of $348.3m in FY19 (up 57%) with net profits of $54.1m, growing 33% from FY18. Revenue growth was primarily driven by organic growth across the business but is supported by a successful acquisition strategy over the long term.
WiseTech CEO Richard White in an interview (Credit: Commsec)
WiseTech is a SAAS business operating across the logistics space. The signature solution it provides to the market is CargoWise platform, which helps firms increase productivity. These productivity gains are realised through a comprehensive suite of logistics management solutions embedded in the platform, that enable automation and more efficient supply chain management. Data can be entered once and is accessible across a client’s global database, increasing accountability and reducing errors. This increases viability and simplifies the supply chain, thus making it far easier to manage. Capitalising on enterprise customers gives them a market with high buying power, which WiseTech later could potentially translate into higher revenue per user.
This puts the company on a PEG ratio of 4.93, making it look one of the most expensive WAAAX companies on the index. A PEG ratio is the ratio of a PE multiple to earnings growth, with a number of one typically being used to demarcate expensive growth companies from cheap ones. A PEG of 4.93 implies that investors are expecting WiseTech to continue slowly dominating the market it is in around the world and establish a huge competitive moat. The company’s strong management team may well make this a reality, but either way it is important for investors to be aware of what the market is pricing in.
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