Xero Ltd (ASX: XRO) shares have been strong performers in 2024.
Since the start of the year, the ASX 200 tech stock has charged approximately 50% higher.
But if you thought it was too late to invest, then think again!
That's the view of analysts at Blackwattle Investment Partners, which believes there are plenty more returns to come for investors.
What is it saying about this ASX 200 tech stock?
Firstly, what is Blackwattle? It is a new generation, highly aligned, Australian investment manager investing in quality businesses and people.
Its Blackwattle Mid Cap Quality fund has been performing very strongly in 2024. So much so, at the end of November it had delivered an annual return of 34.3%.
This fund is a concentrated yet diversified portfolio of some of the highest and most improving quality companies on the ASX. The investment manager notes that it believes that high quality companies have the potential to consistently outperform over the medium term, as their competitive advantages may allow for compounding shareholder returns through market cycles.
ASX 200 tech stock Xero features in the fund, with Blackwattle believing that it can deliver compounding shareholder returns over the long term. Commenting on its performance in November, the investment manager said:
XRO was the largest positive contributor to performance during the month. XRO rallied 16% in November on the back of a strong 1H25 result. XRO is a market-leading, global accounting SaaS platform.
XRO's 1H25 result continued to showcase the benefits of the cultural change brought in by CEO Sukhinder Singh-Cassidy in early 2023, balancing top-line growth with profitability. XRO delivered 25% revenue growth, an EBITDA margin of 31% and free cash flow growth of over 95%, again beating market expectations.
Blackwattle is very confident on the future and has labelled the ASX 200 tech stock as one of the highest quality companies on the Australian share market with strong upside. It adds:
The market's expectations continue to be conservative with consensus expecting revenue growth to fade significantly over the next few years, even though revenue growth has reaccelerated on increasing pricing power, momentum in payments and continued subscriber growth.
We continue to see strong upside for XRO, as they continue their journey to being the market-leading, global accounting software for SMEs, while delivering strong financial metrics. We view XRO as one the highest quality companies on the ASX with a significant long-term, compounding growth profile.
