✅ Buy Alert - 3rd Buy, 35% FCF margin <1% attrition business growing at 20%, 10yr low valuation
Positive management change and continued top customer additions give me confidence amid uncertainties. Business remains top class for a 50% discount from my initial buys.
I am buying more Wisetech (WTC). Best of class business (86% gross margin, ~35% free cash flow margin, growth at ~20% expected mid-term), trading at the low end of the last 10 years p/fcf valuation at ~40x.
Read my past writeups for full context: deep dive, buy alert 2, buy alert 1, FY24 update, H1 FY25 update, CEO shake-up, E2Open acquisition, Back to basics.
What’s going on with the stock?
The stock has declined 55% to AUD 60 from AUD 134, primarily due to the ‘loss of focus’, to put it mildly, by the co-founder and current executive chair, Richard White (30%+ owner of shares). He is the founder and ex-CEO for the last thirty years, the heart of the business. The sex scandal and power-grabs saga undoubtedly caused delays in key product releases, thereby slowing revenue growth.
I am a bit annoyed as it was an unforced error (more here), but as someone who wants to own the Wisetech business forever, I am a happier buyer here.