The Xero Limited (ASX: XRO) share price has been a strong performer in 2020 despite the market volatility.
In fact, on Thursday the cloud-based business and accounting platform provider's shares raced to a record high of $91.49.
When Xero's shares hit that level, it stretched their year to date gain to just under 15%. This compares very favourably to a 10.5% decline by the S&P/ASX 200 Index (ASX: XJO) over the same period.
Why is the Xero share price at a record high?
Investors have been driving the Xero share price higher this year after it continued to deliver strong growth across key metrics.
In FY 2020 Xero delivered a 30% increase in operating revenue to NZ$718.2 million and a 29% jump in annualised monthly recurring revenue to NZ$820.6 million.
This was driven by increases in both its average revenue per user and total subscribers. The latter rose 26% to 2.285 million subscribers thanks to the addition of 467,000 net subscribers during the 12 months.
And due to the benefits of scale, Xero's earnings grew even quicker. The company reported a 52% increase in earnings before interest, tax, depreciation, and amortisation to NZ$139.17 million.
It also recorded its first net profit. Xero's profit after tax came in at NZ$3.34 million for the year, compared to a loss of NZ$27.14 million a year earlier.
Is it too late to invest?
While Xero's shares certainly aren't cheap, I would still be a buyer of them if you planned to invest with a long term view.
At the end of the year Xero had 2.285 million subscribers. Although this is a large number, it is still on a fraction of its addressable market. Management estimates that less than 20% of the English-speaking addressable cloud accounting market has adopted cloud platforms.
This means there is still a material market opportunity for the company over the next decade. And given the quality of its product, I expect it to capture a growing slice of this market over the long term and drive strong earnings growth.
