WiseTech shares are up 15% to a new all-time high - and this investor is still buying

By all traditional metrics, the share price of WiseTech Global (ASX: WTC) would make any value-oriented investor squirm. With a trailing P/E ratio of over 164 and a share price that is back over the $100 mark, it is expensive by every conventional measure in the book. 

But then again, WiseTech is not viewed by the market as a traditional company - or a conventional one for that matter. Even against analysts' (and the market's) incredibly lofty expectations, CEO Richard White and his team continue to clear every hurdle in its path. 

In its earnings release today, WiseTech increased revenues by 28% to over $1 billion. Even though it was at the low end of its own guidance range for FY24, it beat the consensus analyst estimate handily. 

However, given its extreme valuation, does anyone have the stomach to buy at these levels? A 16% earnings-day share price appreciation says yes, as does Dushko Bajic of First Sentier Investors. Bajic gives me his updated view on one of the ASX's most beloved companies in this wire.

Key Results

• Total revenue +28% year-over-year to $1.04 billion (vs company guidance A$1.04-1.095 billion and consensus estimate of A$1.06 billion)
• CargoWise revenue +33% year-over-year to $880.3 million
• EBITDA +28% year-over-year to $495.6 million
• EBITDA margin +100 bps to 48%
• Underlying NPAT +15% year-over-year to $283.5 million (consensus estimate of $265.7 million)
• Final dividend +10% to 9.2 cents per share, representing 20% payout ratio
• FY25 revenue guidance $1.3 to $1.35 billion (representing revenue growth of 25%–30%)
• FY25 EBITDA guidance of $660 million to $700 million (representing EBITDA growth of 33%–41%) at EBITDA margin between 51-52%."

Some analyst estimates are provided by FactSet. 

In one sentence, what was the key takeaway from the WiseTech result?

Wisetech delivered a great result, with Cargowise revenue growth of 33% for the year, matching the 8-year CAGR of 33% and this is despite some notable disruptions in global trade routes, underscoring the functional value of the product and the consistency of the business model.

Were there any major surprises in this result that you think investors should be aware of?

Despite high expectations, Wisetech issued earnings guidance for next year (FY 2025) about 5% above market forecasts and they are on track for EBITDA growth approaching 40% as margins rebound. CargoWise is gaining traction amongst Asian freight forwarders with Wisetech announcing Nippon Express signing up as a new customer win, the Japanese giant being a global top 10 3PL (third-party logistics provider).

Would you buy, hold or sell this stock on the back of this result?

Bajic's view: BUY

Wisetech is a BUY, as it continues to build on its strengths in freight forwarding software, with a large number of global rollouts to drive top and bottom-line growth already secured. On top of this, Wisetech is growing its TAM (total addressable market) with new product releases such as global customs and compliance and significant extensions of functionality in the areas of land-side logistics and container transport optimisation.

Our valuation sits above the share price and we see good prospects for further gains as Wisetech delivers on the roadmap set out by its talented founder, Richard White.

What’s your outlook on this stock and the sector over the year ahead? Are there any risks to this company and its sector that investors should be aware of?

We are bullish on the prospects for Wisetech, as the company becomes the Microsoft 365 of global freight forwarding. Amongst the Top 25 global freight forwarders, the volume growth of Wisetech’s clients over the past 12 years is 82% compared to only 12% for those who aren’t customers. Cargowise has become the must-have industry standard.

Wisetech doesn’t have much in the way of direct like-for-like competitors but in terms of risks, two issues have shown themselves to prove challenging for the business for brief periods. 

The first was the pandemic, which slowed revenues and profits. The second was a couple of bouts of indigestion from a series of acquisitions. Most of these have proven to be successful in accelerating the geographic reach of the business but do come at the cost of near-term margin compression.

From 1-5, where 1 is cheap and 5 is expensive, how much value are you seeing in the market right now? 

Rating: 3

As a stock picker, when I aggregate the opportunities ahead for the portfolios we manage, I see a number of strong franchises that can continue to run their own race in terms of growing revenues, cash flows and profits at attractive ROIC (return on invested capital). This is important as the economy will likely shift to slower growth and interest rates remain a headwind but a useful tool to offset any weakness in unemployment.

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