After falling as low as $9.97 during the COVID-19 market crash last March, shares in ASX logistics software company WiseTech Global Ltd (ASX: WTC) have been steadily climbing back towards their pre-coronavirus levels in recent months.
At the time of writing, the WiseTech share price is trading at $31.20, well over 200% above its March low and nudging a new 52-week high (the current high of $34.42 was set just last week).
What’s driving the WiseTech share price?
Back in August, the WiseTech share price soared on news the company had managed to deliver growth in revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) in line with guidance, despite the market disruption caused by COVID-19.
Total revenue jumped 23% year on year to $429.4 million in FY20, while EBITDA was up 17% to $126.7 million. Net profit after tax (NPAT) skyrocketed 197% to $160.8 million, but much of this was attributable to a non-cash fair value gain of $111 million due to renegotiations of ‘earnout obligations’ on prior acquisitions. This sounds like complicated accounting-speak but refers to amounts WiseTech was obliged to pay to the owners of companies it had acquired if those companies met certain financial targets.
With those targets now renegotiated, WiseTech no longer needs to set aside so much money to cover these contingent payments and gets a healthy (if somewhat artificial) boost to its bottom line.
Underlying NPAT (excluding that non-cash gain as well as some other finance costs) came in at $52.6 million – flat versus FY19 – but still a good result considering WiseTech upped its investment in research and development by more than 40% to a little over $159 million in FY20. The company also ended FY20 with a strong balance sheet, with $223.7 million in cash.
More recent news
From a news perspective, the last few months have been pretty quiet at WiseTech, especially for a company that has historically been fond of making frequent acquisitions (it has snapped up over 40 companies in recent years and made five acquisitions in FY20). So far, there has been no M&A (mergers and acquisitions) activity to speak of in FY21.
The company did recently announce a strategic partnership with international payments provider OFX Group Ltd (ASX: OFX). This will allow WiseTech customers to make fast international invoice payments at competitive exchange rates in some 55 currencies.
Outlook for FY21
Like many companies operating in the current environment, WiseTech has been cautious in making too many firm predictions about the future. However, it has still forecast revenue growth of between 9% and 19% to between $470 million and $510 million, and EBITDA growth in the range of 22% to 42% to between $155 million and $180 million.
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Motley Fool contributor Rhys Brock owns shares of WiseTech Global. The Motley Fool Australia owns shares of WiseTech Global. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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