Why I’m betting big on XERO FPO shares

Well gidday Xero Limited (ASX:XRO)!

Yesterday was the last day of trading for the cloud platform company on New Zealand’s NZX as it makes the big move over to a sole ASX listing.

Despite some sour-grapes in New Zealand at the shift of such a successful company I think the decision makes a lot of sense. Just as we once outgrew the family home and looked to spread our wings in the world, Xero’s move sets the company up for its next stage of global expansion.

Thinking long-term

Drury is an iconoclast and his vision for the business stretches well beyond what the company looks like today or the next 12 months.

In a recent interview with Morgans Financial Limited, Drury re-stated his goal to see Xero logging $NZ1 billion in revenue each year – more than twice the NZ$417 million annual recurring revenue reported at 30 September 2017.

Drury’s goal reflects how early we still are in the industry for cloud accounting and services for small businesses. The opportunity in front of Xero is vast, but it will take time to get there.

This is a point I find myself drawn to as an investor focused on the long-term. One of my personal investing mantra’s (adopted from the legendary David Gardener) is ‘make your portfolio reflect your best vision for our future’. This nestles Xero nicely into my investment style more than a company like Myob Group Ltd (ASX: MYO).

Making it happen

To achieve its goal Xero is continuing to focus on subscriber growth in new and existing markets, but also constantly developing new product features to increase revenue per user.

It can do this incredibly effectively by trawling the huge volumes of high-value data the business produces with machine learning. This can identify new products or markets and in my view will be a big driver of the future transformation of the accounting process. Just today it announced an important new agreement with National Australia Bank Ltd (ASX: NAB).

Adding this kind of incremental value is what great business is all about.

As Xero transitions to a full ASX listing and begins to mature I think that value will translate into significant shareholder returns in the many years to come.

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Motley Fool contributor Regan Pearson owns shares of Xero. The Motley Fool Australia owns shares of Xero.

You can follow him on Twitter @Regan_Invests.

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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