Reviewing Xero Through the Rule of 40
We expect Xero’s near- and medium-term strategic focus to revolve around rationalizing its areas of investment, especially against a backdrop of normalizing demand for business software.
We expect Xero’s near- and medium-term strategic focus to revolve around rationalizing its areas of investment, especially against a backdrop of normalizing demand for business software.
Xero holds a dominant market position in Australia and New Zealand, where its business is supported by network effects.
Xero’s customer base of SMEs is low-quality, due to the segment’s inherently high business failure rates. This will require constant spending into sales and marketing to replenish churned customers.
Metric
|
XRO
|
INTU
|
WDAY
|
---|---|---|---|
Price/Earnings (Normalized) | 88.95 | 35.81 | 35.99 |
Price/Book Value | 17.49 | 9.23 | 7.56 |
Price/Sales | 14.13 | 10.59 | 8.09 |
Price/Cash Flow | 40.92 | 32.46 | 25.69 |
Metric
|
XRO
|
INTU
|
WDAY
|
---|---|---|---|
Quick Ratio | 6.20 | 0.72 | 1.92 |
Current Ratio | 6.62 | 1.29 | 2.04 |
Interest Coverage | 5.31 | 14.56 | 2.85 |
Metric
|
XRO
|
INTU
|
WDAY
|
---|---|---|---|
Return on Assets (Normalized) | 9.57% | 16.07% | 17.72% |
Return on Equity (Normalized) | 21.33% | 27.22% | 36.06% |
Return on Invested Capital (Normalized) | 10.13% | 20.23% | 23.31% |
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