WiseTech Global Ltd (ASX: WTC) has placed another bet on e-commerce in its bid to become a leading provider of software solutions to the logistics execution industry globally.
The company announced today the acquisition of Pierbridge, a parcel shipping transportation management solution (TMS) provider to medium and large shippers in the United States.
According to the announcement, “Pierbridge’s technology automates many large shipping operations across the manufacturing, healthcare, financial, technology and e-commerce sectors for end-users”.
WiseTech Global Founder and CEO, Richard White, said “E-commerce is driving significant parcel shipment growth internationally and domestically”. He also added that, “Pierbridge’s parcel TMS is a scalable technology we can converge and expand with our next-generation e-commerce solutions as we drive deeper into global e-commerce fulfillment.”
The announcement follows recent acquisitions made by WiseTech in Canada, Turkey, France, Belgium and other parts of the world.
The purchase price for the transaction comprises of $37 million up front and an additional amount of up to $22.4 million based on performance.
The ASX announcement acknowledged that this transaction has strategic value, but is not material to the WiseTech Global business.
Given that Pierbridge had 2017 annual revenue of $9.3 million, the transaction is valued at a price to sales ratio of between 4 times and 6 times. That would represent good value if Pierbridge has a high organic sales growth or if its technology can be scaled and used across the WiseTech Global group (which appears to be the plan).
I think WiseTech is an attractive founder led business and its software as a service (SaaS) business could provide shareholders with high margin returns for years to come. With a price to sales ratio of 32 though (based on 2017 sales), its valuation is a bit high in my view.
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The Motley Fool Australia owns shares of 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 Scott Phillips.