The S&P/ASX 200 Index (ASX: XJO) share WiseTech Global Ltd (ASX: WTC) seems on course to deliver considerable earnings growth over the next few years.
For investors who don't know about WiseTech, it's an ASX tech share that describes itself as a leading developer and provider of software for the logistics industry globally.
It has more than 18,000 customers, including some of the largest logistic companies across the world, operating in more than 170 countries. These include 41 of the top 50 global third-party logistics providers, as well as 24 of the 25 largest global freight forwarders worldwide.
Image source: Getty Images
Strong earnings growth expected
The company is predicting FY23 is going to be another good year of financial growth for the business.
At WiseTech's annual general meeting (AGM), the company said it's expecting to grow revenue in FY23 by between 20% to 23% to between $755 million to $780 million. FY23 earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to rise by between 21% to 30%, equating to a range of between $385 million to $415 million.
If this were to happen, the ASX 200 share's EBITDA margin would improve by between one percentage point to three percentage points. When the company delivered this guidance, CEO Richard White said this demonstrated:
…the continued operating leverage we're able to generate as we scale. We're delighted with the continued momentum we're seeing across the business and confident in our longer-term outlook.
We believe we're well placed to benefit from continued consolidation among global logistics operators, and their increasing investment in digital solutions, as well as pursuing our own M&A opportunities.
Commsec numbers suggest that the business could generate 76.8 cents of earnings per share (EPS) in FY23. It could then grow its EPS by 30% in FY24 to $1.00. EPS could jump another 33% in FY25 to $1.34. In other words, EPS could climb by over 70% between FY23 to FY25.
WiseTech recently boosted its earnings potential by announcing the acquisition of Envase Technologies for US$230 million. This business was described as a leading provider of transport management system software for intermodal trucking and landside logistics in North America.
The ASX 200 share is expected to achieve significant profit growth. However, the business has a lot of that growth already priced in.
WiseTech share price valuation and rating
Using the estimate on Commsec that I mentioned before, WiseTech shares are valued at 79 times FY23's estimated earnings.
Taking the FY25 projection, it's valued at 45 times FY25's estimated earnings.
Those are certainly not conventionally cheap valuation metrics. The WiseTech share price has performed strongly since the start of 2022 considering the hit to ASX tech shares – WiseTech is up 3%.
But, of the analyst ratings covering WiseTech, six of them still rate the ASX 200 share as a buy, four rate it as a hold, and one has a sell rating on the company.
If WiseTech keeps delivering strong earnings growth, then it could continue to excite investors.
