The Wisetech Global Ltd (ASX: WTC) share price has been incredibly volatile following a disappointing HY19 result released last month.
Yesterday, the company announced a $300 million fully underwritten placement at a placement price of $20.90, which saw the share price drop 7% after returning from a trading halt before recovering to close higher at $23.
Management says the placement will "add further strength to our balance sheet … increase the capacity to accelerate our long-term organic growth, through relentless innovation and the acquisition of strategically valuable assets".
Is Wisetech Global a buy?
Wisetech shares have fallen 20% and then soared 20% within the space of a month. The company operates in an innovative and technology-focused space, providing operating systems for global logistics. Some notable clients include names such as DHL, UPS and Toll.
While I love the company's growth trajectory, history of strategic acquisitions and sector, Wisetech is simply too expensive for me to make an investment case.
If we take the company's EBITDA guidance for FY19 of $100m – $105m, this means that the company is trading on around almost 70 times EBITDA (not net profit).
Another issue for today's readers is that the share price has jumped another 2.5% to $23.590. When a company raises capital, the share price generally falls to the offer price, and at best, takes a small period of time to flush out profit takers and sellers. Wisetech shares have completely ignored this concept.
How does WiseTech compare to its ASX tech peers?
Afterpay Touch Group Ltd (ASX: APT), Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX) are the three names that dominate the ASX technology sector, Wisetech and Xero Limited (ASX: XRO) trailing close behind.
In the context of purely growth figures vs. valuation (market capitalisation), I believe Appen and Altium offer better value-for-growth than Wisetech.
Foolish Takeaway
Wisetech is undoubtedly a strong fundamental tech play that has demonstrated a history of strong growth. The issue I have is its valuation. A triple-digit PE ratio for EBITDA growth of 28%-35% just doesn't cut it.
I am still confident that theWisetech share price will make new highs this year on the back of its consistent growth and potential acquisitions.
If investors are looking to get in, some patience is needed as the stock needs to fully digest the placement of 14,354,067 fully paid ordinary shares following the institutional placement.
