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The WiseTech share price is tumbling again this week

Tom Richardson

WiseTech Global Ltd (ASX: WTC) shares are now down 9.5 per cent this week despite the freight cargo software business not releasing any specific news to the market. 

The stock is tumbling alongside other richly valued tech plays on the back of renewed concerns that the US and China may not reach an initial trade deal by a December 15 deadline.

If no agreement is reached the U.S. has threatened to impose higher tariffs on a range of Chinese imports. 

WiseTech has made the headlines recently after being accused of artificially inflating its organic profit and revenue growth rates by an overseas-based short seller. 

WiseTech has dismissed the allegations and at its November 19 AGM told the market it’s on track to deliver FY 2020 EBITDA between $145 million to $153 million on revenue between $440 million to $460 million. If the mid-point of guidance is achieved it would equal fiscal year growth at 37% and 29% respectively.

It’s worth noting the EBITDA (operating income) is growing faster than the revenue as WiseTech is a software-as-a-service (SaaS) business that boasts high gross profit margins and the sweet spot of recurring revenues delivered on relatively fixed operating costs. 

Even at $25 this afternoon the stock’s valuation is still high using conventional SaaS valuation metrics and off the charts if you use traditional price-to-earnings metrics. 

Given the backdrop the stock is likely to remain volatile through 2020.

Other SaaS-based businesses impressing investors recently include Xero Limited (ASX: XRO) and Technology One Limited (ASX: TNE). 

The post The WiseTech share price is tumbling again this week appeared first on Motley Fool Australia.

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Motley Fool contributor Tom Richardson owns shares of Altium and Xero. The Motley Fool Australia owns shares of Altium and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019