WTC share price in focus
Founded in 1994 by Richard White and Maree Isaacs, WiseTech Global develops cloud-based software solutions for the international and domestic logistics industries.
WiseTech offers a comprehensive suite of products that support various logistics functions, including forwarding and customs, landside transport, rates and contracts, warehousing, and transport management systems.
Its flagship software, CargoWise, is a market-leading platform widely adopted by the logistics industry. It is used by 24 of the 25 largest global freight forwarders and 46 of the top 50 third-party logistics providers, cementing its reputation as an industry leader.
The appeal of ASX Information Technology shares
The S&P/ASX200 Info Tech Index (ASX: XIJ) has delivered an average annual return of 13.70% over the last 5 years, compared to the broader ASX 200’s 8.41% 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
As a growth company, one way to put a broad estimate on the WTC share price could be to compare its price-to-sales multiple over time. Currently, WiseTech Global Ltd shares have a price-sales ratio of 27.81x, compared to its 5-year average of 31.86x, meaning its shares are trading below their historical average. This could mean that the share price has fallen, or sales have increased. In the case of WTC, revenue has been growing over the last 3 years.
Please keep in mind that context is important – and this is just one valuation technique. Investment decisions can’t just be based on one metric.
The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! Both of these models would be a better way to value the WTC share price.
