WTC share price in focus
Founded in 1994 by Richard White and Maree Isaacs, Wisetech Global is a developer of cloud-based software used for international and domestic logistics industries.
Wisetech’s vast suite of software products is used across various logistics functions including fowarding & customs, landside transport, rates & contracts, warehousing, and transport management systems.
Their cornerstone software is called Cargowise. It’s become an industry-leading solution now used by all 25 of the largest global freight forwarders and 46 of the top 50 third-party logistics providers.
The appeal of ASX Information Technology shares
The S&P/ASX200 Info Tech Index (ASX: XIJ) has delivered an average annual return of 14.04% over the last 5 years, compared to the broader ASX 200’s 4.14% return. So, here’s why tech shares like WTC are drawing attention.
High Margins
Tech companies often boast better margins than more ‘traditional’ brick-and-mortar businesses. That is, they tend to be more profitable.
This is because they usually have low marginal costs and lower overheads (things like plant and equipment).
WTC’s latest annual report revealed gross margins of 84.00% and an operating margin of 37.30%.
Recurring revenue
Many tech businesses benefit from recurring revenue models like ‘software-as-a-service’ (SaaS). Compared to one-time product sales, this subscription-based approach generates consistent income, smooths revenue, and enhances predictability over time.
Global scale
Unlike physical businesses constrained by logistics, regulations, and trade wars, tech firms can often reach global markets with much less effort (and cost). By dealing in software accessible by something as simple as an internet connection, tech companies can quickly and efficiently increase their customer base.
WTC share price valuation
The S&P/ASX200 Consumer Discretionary Index (ASX: XDJ) has returned 14.04% per year over the last 5 years compared to 4.14% per year from the broader ASX 200. The consumer discretionary sector covers a broad range of goods and services, so it can be hard to compare companies in this group. However, here are a few things you might want to consider when investing in a consumer discretionary company like WTC.
Timing
Consumer discretionary companies usually have their best performance when interest rates are low. Just think about it – when rates are low, you’re more likely to go out and buy those ‘toys’ or things that you may not really need, but you certainly want. That could be new tech, travel, or your new power tools – it all comes under this category.
Despite the current high interest rate environment, WTC has still managed to grow revenue by 27.1% per year over the last three years.
Dividends
The dividends you’ll receive can vary with the current economic environment, but historically many of the big ASX consumer discretionary shares have been reliable dividend payers.
WTC offers a current dividend yield of 0.1% and over the last 5 years has averaged 0.1%.
Familiarity
We’re often advised to invest in what we know. Consumer discretionary shares may be a good fit then, as these tend to be companies that we see on a daily basis and their business model is easy to understand. You probably have a better idea how WiseTech Global Ltd make their money then some niche tech company or a B2B industrials company.
This doesn’t necessarily mean performance will be any good, but they’re definitely easier to get your head around when you’re starting out investing.
