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Why I think it could be time to sell Wisetech Global Ltd

The Wisetech Global Ltd (ASX: WTC) share price was a standout performer in 2017 with the company’s shareholders enjoying returns exceeding 150 per cent over the past year.

And it appears the company’s share price is showing little sign of slowing, gaining another 2.3 per cent on Thursday.

In financial year (FY) 2017 Wisetech reported revenue of $153.7 million, up 50 per cent on the previous year and net profit after tax of $32.2 million, up by 1,386% on the previous year.

Adding to the success story, Wisetech’s management has indicated there are more good things to come in 2018.

In late November last year the company provided an update on its revenue guidance for FY 2018 “to allow for additional organic growth” and recently announced acquisitions in the Netherlands and North America.

Wisetech stated it expects revenue to grow between 35 per cent and 41 per cent to between $207 million and $217 million while EBITDA is still expected to grow between 32 per cent and 39 per cent to $71 million and $75 million.

Further, Wisetech’s market value has eclipsed $4.2 billion and the global developer of cloud-based software solutions has arrived on the ASX 200 list.

All this sounds very positive, but there are other factors to consider.

Wisetech embarked on an aggressive campaign of inorganic growth in 2017 which saw the company acquire 11 businesses.

As such, Wisetech’s appetite for acquisitions may expose the company to dangers associated with rapid expansion, including integration challenges and associated costs. Especially compared to companies which favour slower, more methodical growth.

While only time will tell if Wisetech’s strategy will pay off, some analysts are betting against the top-performing tech company and rating its stock as a ‘sell’.

And a couple of Wisetech’s key players also seem to be of the view that it’s a good time to sell.

Wisetech CEO and founder Richard White last month offloaded more than $10 million worth of Wisetech shares while director Michael Gregg sold more than $23 million in Wisetech stock.

With the company’s shares changing hands for more than 130x earnings, further questions can be raised about whether it represents value.

Amid all these conflicting signs it is difficult to discount Wisetech yet doubts concerning the company’s prospects linger.

As such, those looking to gain exposure to top performing ASX tech shares may do well to first consider others such as Altium Limited (ASX: ALU) or Afterpay Touch Group Ltd (ASX: APT).

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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