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The Xero share price surged 18% higher in November

James Mickleboro
xero share price

The Xero Limited (ASX: XRO) share price continued its impressive run last month and recorded another strong gain.

During November the business and accounting software provider’s shares rallied 18% higher.

This latest gain means the Xero share price is up over 93% since the start of the year.

Why did the Xero share price race higher last month?

The Xero share price was racing higher last month following the release of its half year results.

During the first half of FY 2020 Xero reported a 32% increase in operating revenue to NZ$338.7 million.

Also growing strongly was its annualised monthly recurring revenue (AMRR). At the end of the period its AMRR had lifted 30% to NZ$764.1 million.

What were the drivers of its strong half?

Another jump in its subscriber numbers played a key role in its strong half. Total subscribers grew 30% over the prior corresponding period to 2.057 million.

It is worth noting that it took Xero over ten years to reach one million subscribers, but just two and a half years for the second million. Management believes this rapid growth demonstrates the pace of Xero’s adoption across a number of markets.

This led to Xero’s total subscriber lifetime value increasing 37% to NZ$5.4 billion. This means that more than NZ$1 billion of value was added during the half.

What about its earnings?

Xero also reported strong growth in its EBITDA and net profit after tax.

First half EBITDA excluding impairments came in at NZ$65.9 million, which was more than double the NZ$34.5 million it posted a year earlier.

And on the bottom line, first half net profit after tax increased by NZ$29.9 million to NZ$1.3 million.

Another highlight was that its free cash flow was positive during the half. Xero delivered free cash flow of NZ$4.8 million, compared to a free cash outflow of NZ$9.8 million a year earlier.

Is it too late to invest?

Whilst Xero’s shares are looking fully valued now, I believe its outstanding long-term growth potential makes it worth considering as a buy and hold investment. I would buy it along with fellow tech stars Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX).

The post The Xero share price surged 18% higher in November appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium, Appen Ltd, 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