Codan vs Xero: Which ASX tech stock is the better buy in October?

Codan Ltd vs Xero shares: Which tech stock looks better this month?

Sometimes, investors have to choose between two very different tech shares that both sit at the heart of the Aussie market’s innovation scene. Codan Ltd (ASX: CDA) and Xero Ltd (ASX: XRO) are two leaders in very different technology niches—one focused on essential communications, mining and defence electronics, the other a cloud-based accounting software platform with global ambitions. Here’s how they stack up in October if you’re weighing Codan vs Xero shares.

The case for Codan

Codan is a homegrown electronic technology company that’s been around for decades but has seen a huge surge in attention lately. Its operations cover advanced communications, gold and metal detection equipment (Minelab), mining technology solutions, and defence electronics. Codan’s customer base includes governments, the mining sector and private consumers, and, according to its most recent public description, it draws a significant chunk of its sales from North America. The company is truly global, with manufacturing in Adelaide and Malaysia, and a network of business and engineering sites across several continents.

Several key numbers jump out from Codan’s current snapshot. Its market cap sits at $11.75 billion, making it a substantial ASX tech presence. Year to date, its share price has rocketed up 84.6%, which is phenomenal momentum even by tech sector standards. Codan delivers a fully franked dividend, with a current yield of 0.93%—not huge, but backed by a long record of paying and steadily increasing dividends over time (and always fully franked). The P/E ratio is 54.21, and its latest reported earnings per share is $0.959.

The case for Xero

Over in the cloud, Xero has grown from a New Zealand-scale disruptor to a global force in small-business accounting software. The company is all about delivering its platform via monthly subscription, targeting small and medium businesses everywhere. The sticky, recurring nature of this business is a big attraction for fans of ‘SaaS’ (Software as a Service) models in tech investing.

By the latest figures, Xero’s market cap is $9.90 billion—a sizeable company, but a touch smaller than Codan. However, 2026 to date has been rough for Xero; the shares are down 49.4%. Despite a P/E ratio of 49.87 being assigned in the headline metrics, Xero shows a negative earnings per share (-$0.158), which doesn’t mathematically match (see the note below). It does not pay a dividend and has no franking. For investors looking for aggressive growth, though, Xero remains a business with a global media profile, a strong market position, and a product that has become mission-critical for thousands of businesses.

Valuation comparison

Let’s line up both companies’ key numbers:

Note: Xero’s reported P/E ratio may be based on a different earnings measure (e.g. underlying or forward earnings) than the EPS figure shown, which is why they may appear inconsistent.

Codan trades on a high P/E—but that is similar to Xero’s, and both are at the end of the tech sector’s usual range. The key difference? Codan is profitable (and growing fast), while Xero currently shows a negative EPS.

Codan provides a modest, fully franked dividend, while Xero pays none.

Price-to-book or other balance sheet valuation metrics weren’t available in the data supplied for this article.

Recent share price performance

Comparing recent share price activity up to 29 September:

• Codan closed at $64.43, soaring almost 24% on the day and up 84.6% for the year to date.
• Xero finished at $58.04, up 0.57% for the session but down a striking 49.4% for the year to date.

That’s as stark a contrast as you’ll see. Codan has enjoyed surging investor confidence and some major catalysts in September, while Xero is still in the doghouse for 2026, at least by share price action.

Which is the better buy?

If I had to pick between Codan and Xero, my vote right now goes to Codan. While both are quality tech stories and both trade at punchy multiples, Codan is not just profitable but thriving—and that’s reflected in its cracking 84.6% share price surge this year. Xero, meanwhile, remains a fantastic business but is still struggling on the profit front, and its share price has been absolutely hammered in 2026.

Codan’s fully franked dividend, even if small, is a cherry on top. Xero’s lack of yield and negative EPS add another strike for now. For anyone seeking profitable growth today, my pick would be Codan.

The post Codan vs Xero: Which ASX tech stock is the better buy in October? appeared first on The Motley Fool Australia.

More reading

• 5 leading ASX shares I’d buy and hold until 2040
• Buy, hold, sell: Premier Investments, New Hope, Xero shares
• Up 120%, is it too late to buy Codan shares?
• 5 things to watch on the ASX 200 on Wednesday
• Can the Xero share price climb back to $100?

Motley Fool contributor Laura Stewart has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial draft. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.