The Australian tech sector is tiny compared to that of the United States, but Australia is slowly building up a number of great local tech companies that have been growing strongly, both locally and in a number of overseas markets.
Here are 3 of my top picks: Xero Limited (ASX: XRO), Webjet Limited (ASX: WEB) and WiseTech Global Ltd (ASX: WTC). All 3 have very different but proven business models and have grown strongly over the past 5 years. I believe they also all have strong growth prospects over the next decade, driven mainly by their growing overseas markets.
Xero
Xero is an online accounting software provider for small businesses that has seen incredible growth over the past 10 years and I feel that there are no signs of that growth slowing down anytime soon. One of Xero's key differentiators over its competitors is that it is affordable and user-friendly, making it ideal for small businesses, unlike some of its competitors' products, which can be expensive and more complex to use.
In its half year earnings to 30 September 2019, operating revenue was up 32% to NZ$338.7 million, while earnings before interest, tax, depreciation and amortisation almost doubled. Xero has a very high gross profit margin of 85%. Despite its rapid recent growth, I believe that Xero still has a long runway for growth ahead of it over the next decade.
Webjet
Concerns about the spread of the coronavirus saw ASX travel shares drop over the past 2 weeks, and Webjet was one of the worst hit, although it has regained a bit of ground over the past few days. I believe that Webjet's share price have been somewhat oversold, which means now could be a good time to take position in a company that I feel has strong growth prospects over the next few years, due to the continued transition of the travel industry to online bookings.
In particular, the travel group's WebBeds business-to-business segment has been growing at a rapid rate. Webjet appears to be well positioned to continue to grow this business segment quickly over the next few years.
WiseTech Global
WiseTech Global is a leading global developer and provider of software solutions for the logistics industry. Its customers include over 12,000 of the world's logistics companies across more than 150 countries. It has carved out a very successful and strong niche in the global market.
For the 12 months ending June 2019, WiseTech Global recorded revenue of $348 million and net profit after tax of $54 million, a 57% and 33% annual increase, respectively.
WiseTech Global continues to grow at a rapid pace, in both size and scale via organic growth and targeted acquisitions. It has made 17 acquisitions across Europe, Asia, Australasia and the Americas since 2018.
