The WiseTech Global Ltd (ASX: WTC) share price rocketed 34.5% higher yesterday, but is the Aussie tech share overvalued?
Why did the WiseTech share price surge 35%?
The big factor was a bumper full-year earnings result from the logistics software company.
Total revenue for WiseTech grew to $429.4 million, up by 23% on the prior year. That included a 20% jump for its CargoWise core platform with revenue from newly acquired businesses up 29% to $166.4 million.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) grew by 17% to $126.7 million on an EBITDA margin of 30%.
Impressively, WiseTech's net profit after tax surged 197% to $160.8 million including a fair value gain of $111.0 million.
The software group also reported a 1.60 cents per share fully franked dividend for shareholders.
That saw investors scramble to buy in with the WiseTech share price rocketing higher in yesterday's trade.
Is the Aussie WAAAX share overvalued?
Valuing ASX tech shares is difficult at the best of times. However, if the coronavirus pandemic has taught us anything, it's that tech and gold shares are in high demand.
I think a 35% jump in one day indicates that the WiseTech share price may be overvalued.
It's rare to see any share surge that much higher and stay at that valuation in the long term. Determining intrinsic value is a tough game and I think we'll see investors continue to trade WiseTech shares heavily in the coming days.
The WiseTech share price currently trades at a price-to-earnings (P/E) ratio of 96.9. That means you're paying a lot today for expected growth tomorrow.
Yesterday's revenue and EBITDA figures suggest that maybe it is worth that much. However, I think I'd rather err on the side of caution and think longer term than get trapped in the current tech mania.
Foolish takeaway
In a difficult earnings season, WiseTech has certainly delivered for its investors. I think the strong WiseTech share price gains indicate that there is still serious growth potential on offer.
However, given the lofty valuations tech shares are attracting, I think I'll look elsewhere in the market for undervalued buys.
