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Is Xero poised to deliver a stellar half-year report?

The peers of Xero Limited (ASX: XRO) have all posted strong results this reporting season. Could the Xero share price be ready for the next leg up? 

How did the WAAAX stocks perform?

WiseTech Global Ltd (ASX: WTC) reported a bumper result with revenues soaring 57% and net profit rising 33%. Its share price has been going gangbusters, launching more than 30% since the day of its result, two weeks ago.

Altium Limited (ASX: ALU) also delivered a strong report with expanding profit margins and net profit rising 41%. The company is confident in achieving its near-term goals of 100,000 Altium subscribers for its printed circuit board design software and US$500m revenue by 2025. Altium subscription/subscribers are a vital source of continuous revenue, the Altium Designer 14 pricing starts at $7,245 USD for a one year subscription. The Altium share price is up more than 10% since its report on August 19.

The Afterpay Touch Group Ltd (ASX: APT) share price has gone parabolic having more than doubled all its metrics across sales, customer base and active merchants. While its share price is up more than 30% in just eight trading sessions, the company has a lot more to give.

The Appen Ltd (ASX: APX) share price has experienced some turbulence, soaring 10% the day before the release of its earnings and nose diving some 15% on the day of the announcement. In light of such volatility, Appen delivered some pleasing figures with revenue up 60%, NPAT up 67%, integration and synergies with its acquisition of Figure Eight and Leapforce.

Is Xero the lucky last?

Xero’s peers have set a very high growth benchmark, but I am confident that Xero is no laggard. In the company’s 2019 Annual Meeting held on 15 August, management alluded to a stellar FY19 performance. The company cited a 31% growth in subscriber numbers over FY19, with particularly strong numbers in international markets. A net 432,000 subscribers joined Xero in FY19, taking overall subscriber numbers to more than 1.8 million. Other metrics include operating revenue for the year increasing by 36% and reported EBITDA increasing by 52%.

FY19 represents a significant milestone year for Xero as it delivers a positive free cash flow result for the first time. It cites a free cash flow of $6.5 million compared to last year’s negative $28.5 million.

Xero will report its half-year update in November 2019. I believe the company will deliver pleasing results that are at or above market expectations.

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Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Altium, WiseTech Global, and Xero. The Motley Fool Australia owns shares of Appen Ltd. 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.

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