ASX tech shares have taken a beating over the last six months, but WiseTech Global
(ASX: WTC) shares have gotten through unscathed. Is WiseTech now one of the most expensive ASX tech shares?
About WiseTech
WiseTech Global was founded in 1994 by Richard White to provide software for the logistics sector. Since then it has grown to become a global provider of logistics software, claiming to service 19 of the top 20 logistics companies globally.
WiseTech makes money by charging its customers on a ‘per use’ basis rather than as a standard subscription model. Meaning, WiseTech directly benefits as its customers grow their businesses.
Comparison To Appen Ltd (ASX: APX)
There’s a reasonable argument that the price-earnings (PE) ratios of high-growth companies are largely irrelevant and can’t be used to make a judgment on the value of a company.
While it’s true that you can’t compare the PE of WiseTech to, say, Commonwealth Bank (ASX: CBA), you could expect the PE ratio to be somewhat similar to another high-growth company like Appen Ltd (ASX: APX).
Appen has taken a tumble recently, down 22.5% over the last three months, while WiseTech shares are up more than 20% over the same period.
These movements were in response to Appen’s half-year report and WiseTech’s full-year results. So, what were the differences?
Revenue: Appen reported revenue growth of 60% to $241.5 million, while WiseTech reported revenue growth of 57% to $348.3 million.
EBITDA: Appen reported growth in earnings before interest, tax, depreciation and amortisation (EBITDA) of 81% (underlying) or 48% (statutory). In comparison, WiseTech reported EBITDA growth of 39%.
NPAT: Appen reported statutory net profit after tax (NPAT) growth of 33% compared to 32.6% for WiseTech.
The result? Appen shares went down, WiseTech went up, and Appen now trades on a PE multiple of around 50 times while WiseTech’s PE multiple is over 192 times.
My Take
While I understand PE ratios are of limited use, when comparing two companies with similar growth and prospects you would expect to see a somewhat similar result. What we actually find though is that WiseTech is in a league of its own and seems to continue higher while other tech shares are being sold off.
The conclusion could be either that Appen shares are very cheap or WiseTech shares are very expensive, or maybe WiseTech is simply a far superior company. Whichever way it is, something doesn’t look right.
I’ll be sticking to the growth companies identified in the free report below.
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Disclosure: At the time of writing, Max does not have a financial interest in any of the companies mentioned.
