In a market release today, cloud-based accounting software provider XERO FPO NZ (ASX: XRO) announced a number of key milestones and statistics to the ASX, including:
- It has surpassed more than 400,000 customers
- Millions of small businesses are now connecting in the Cloud on Xero; and
- It processed NZ$250 billion of transactions in 2014
Throughout 2014 the New Zealand-based $1.9 billion technology company has seen its share price fall from above $40 to around $15 currently, as myopic investors fell out of love with the stock.
However despite slower-than-expected growth in the USA (one of its key markets), CEO Rod Drury said: "Today, New Zealand and Australia's most loved accounting platform has achieved a similar position in the UK and is back on track in US."
The latest customer milestone comes ahead of key selling seasons in the UK, New Zealand and the US.
Moving forward the company says it's well placed to provide a bigger role in the small business economy, having increased its staff count to over 1,000. It is also experiencing a strong uptake by customers on mobile devices, with 145,000 downloads of the Xero Touch app in the past 12 months.
Xero also stands to capitalise on the rise of big data. It manages over 500 servers across redundant data centres managing 500TB of production data. "We have our sights set on not just leading in building our Cloud infrastructure, but also putting the innovations and investments from the global Cloud providers like Microsoft, Google and Amazon to work for small businesses," Mr Drury said.
Buy, Hold, or Sell?
Below $15 per share, Xero trades on a price-sales ratio of 27, which seems high. However if it can continue to achieve the same growth rates in markets like Australia, the UK and US, it will look very cheap in hindsight.
Indeed in the half year to September 30 2014, revenue grew by 80%. As more small businesses recognise the value of accessibility and simplicity in Xero's offering, the network effect will make its revenues stickier and its scale compound.
