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Macquarie Group Ltd (ASX: MQG) is one of the largest businesses on the ASX. But is it one of the best ideas as an ASX dividend share for income in the S&P/ASX 200 Index (ASX: XJO)?

Many of the biggest ASX 200 shares are known for being dividend payers, such as Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Limited (ASX: FMG).

So where does Macquarie fit in?

Macquarie is a global investment bank with exposure to four main segments with different businesses – Macquarie Asset Management (MAM), banking and financial services (BFS), commodities and global markets (CGM), and Macquarie Capital.

Macquarie dividend

Macquarie’s board has committed to a dividend policy to pay out between 50% to 70% of annual profit.

In the company’s recent FY22 result, the board decided the final dividend would be based on a 50% dividend payout ratio which, in dollar terms, was a dividend of $3.35 per share. This led to the overall FY22 payout ratio being 50%, with an annual dividend of $6.22 per share.

At the current Macquarie share price, that annual dividend translates into a partially franked dividend yield of 3.6%. On top of that, Macquarie shares have risen by 20% over the last year so the past 12 months have been handy for shareholders.

I like the above-mentioned dividend yield considering it doesn’t factor in the franking credits and it’s only based on a 50% dividend payout ratio.

Why could a 50% dividend payout ratio be attractive?

It would be understandable to want as much dividend income as possible each year.

However, Macquarie operates across the world in a number of segments. There are investment opportunities everywhere and the business has proven it can identify the right areas to target.

In FY22, Macquarie generated $4.7 billion of net profit after tax (NPAT). Five years ago, in FY17, it made $2.2 billion of net profit. Over the past five years, Macquarie has more than doubled its profit and the Macquarie share price has doubled as well.

By retaining half of the net profit each year, the company can invest that money back into the business and make more profit.

Macquarie made a return on equity (ROE) of 18.7% in FY22 and 14.3% in FY21. In other words, Macquarie has made a return of at least 14% on the money in the business in the last two years, compared to a dividend yield which is in the low-to-mid single digits. Shareholders seem to get a stronger return by leaving profit in the business.

I think Macquarie has struck a good balance between rewarding shareholders with dividends and investing for profit.

Foolish takeaway

I think Macquarie is a very effective ASX dividend share in the large cap space. It can provide a balance between dividends and growth over the long term.

At the time of writing, the Macquarie share price has dropped 13% over the last month, so it’s now cheaper. While there could be more volatility ahead, I think Macquarie is well-positioned to get through whatever happens next.

The post Is Macquarie a quality ASX dividend share worth buying? appeared first on The Motley Fool Australia.

More reading

• Is a big scary bear coming for ASX 200 shares, or could it be just a playful cub?
• 5 things to watch on the ASX 200 on Tuesday
• This fundie has beaten the ASX 200 every year for the past 2 decades. Here’s how
• Here are the top 10 ASX shares today
• Why have ASX 200 shares popped then dropped on Monday?

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The TechnologyOne Ltd (ASX: TNE) share price is on the slide on Tuesday morning.

In response to the release of the enterprise software company’s half-year results, investors have sold down the TechnologyOne share price by 3% to $10.08.

TechnologyOne share price fall despite strong first-half growth

• Total revenue up 19% to $172.5 million
• SaaS annual recurring revenue (ARR) up 44% to $225.1 million
• Total ARR up 23% to $288.5 million
• Profit after tax up 18% to $33.2 million
• Interim dividend up 10% to 4.2 cents per share

What happened during the first half?

For the six months ended 31 March, TechnologyOne reported a 19% increase in revenue to $172.5 million and a 44% jump in SaaS ARR to $225.1 million.

Management advised that this reflects an acceleration of customers moving to its global SaaS enterprise resource planning (ERP) solution. More than 138 large enterprise customers made the shift, which is the highest number to date for any comparable period. This was driven by its ‘end of on-premise program.’ Pleasingly, the majority of remaining on-premise customers are committing to transition before 2024 when its on-premise support will cease.

Another driver of its growth was its UK business, which was firing on all cylinders during the half. It delivered a profit before tax of $2.3 million, which is more than double the same period last year. But management isn’t resting on its laurels and sees significant growth opportunities in the coming years. Particularly given how the total addressable market in the UK is three times greater than the APAC addressable market.

Management commentary

TechnologyOne’s CEO, Edward Chung, was pleased with the half. He commented:

These are strong half year results for TechnologyOne and validate the strength of our SaaS strategy, which continues our strong growth trajectory in both Australia and the UK.

This half-year, we delivered a break-even cash flow generation result, with cash and cash equivalents up 16%. Cash flow generation will be strong over the full year, and we expect it to represent approximately 85% of net profit after tax. Cash flow generation will progressively align to NPAT by FY24.

TechnologyOne’s Chair, Adrian Di Marco added:

Our results are due to the continuing strong demand for our global SaaS ERP solution. Today, 97%+ of our revenue comes from our SaaS and Continuing Business. This is an outstanding achievement for the company to have transitioned from a traditional on-premise company to a SaaS company over the last 5+ years. In light of the company’s strong results, and our confidence going forward, the dividend for the half year has increased to 4.20 cents per share, up 10% on the prior year.

Outlook

Looking ahead, TechnologyOne expects to deliver profit before tax growth of 10% to 15% and SaaS ARR growth of greater than 40% in FY 2022.

Mr Chung also dismissed concerns that the economic environment could stifle its growth. He said:

There is concern in the financial press about the deteriorating economic environment because of inflation and increasing interest rates. Over the past 35 years we have continued to grow strongly in challenging economic environments such as this. We will do so again.

Mr Chung also confirmed that the company is on track to deliver total ARR of $500 million+ by FY 2026. This is up from its current base of $288 million. In addition, thanks to the economies of scale from its global SaaS ERP solution, it also expects its profit before tax margin to expand to 35% by then.

The post TechnologyOne share price slides despite strong first-half SaaS growth appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• 2 ASX tech shares I would buy after the heavy sell-off
• You won’t find more profitable ASX tech shares than these companies right now
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• Why I would invest $10,000 into these ASX 200 shares right now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Amid all of the volatility on the ASX share market, experts have found some ASX growth shares that look like buys right now.

A lower share price may mean that the business is better value for investors now.

Both of the below businesses are growing globally and achieving rapid revenue growth.

City Chic Collective Ltd (ASX: CCX)

City Chic describes itself as a global retailer that specialises in plus-size women’s apparel, footwear, and accessories. It operates a number of different brands including City Chic, Avenue, Evans, CCX, Hips & Curves, and Fox & Royal.

Its clothes are being sold in ANZ, the US, the UK, Europe, and the Middle East.

The business is growing quickly. In the first half of FY22, it generated sales growth of 46%. In a recent update regarding the second half, it revealed that it saw “strong” total sales growth of 25%, with USA total sales growth of 47% and global partner sales growth of 465% (showing an extension of its omni-channel presence in key markets).

It’s also expecting FY22 second-half earnings before interest, tax, depreciation, and amortisation (EBITDA) to beat the first half.

The ASX growth share is aiming to expand in the plus-size market which is forecast to grow by around 7% annually. City Chic notes that the average annual spend in plus-size is currently materially less than the rest of the women’s apparel market. There is also a forecast of strong growth in online channels in the global plus-size market.

It’s currently rated as a buy by the broker Macquarie, with a price target of $6.70. It’s positive about the business over the longer term. It thinks the City Chic share price is valued at 14x FY23’s estimated earnings.

The City Chic share price is down 1.2% to $2.48 in early trade on Tuesday.

IDP Education Ltd (ASX: IEL)

IDP Education is a business that provides English language testing, student placement, and English language teaching services.

Closed borders had been a serious limiting factor on IDP Education’s earnings, but the company said the strength of its business model, impactful innovation, and attractive policy landscape delivered a “strong rebound of results” in the first half of FY22.

It saw “strong volume increases” in English language testing and northern hemisphere study destinations. It said that English language testing volumes increased by 79%, with testing revenue rising 62% to $256.7 million.

Total student placement volumes were up 33% for the year, with a growing demand for northern hemisphere countries leading to a 63% increase in multi-destination student placement volumes.

Australian student placement volumes have been subdued. However, there have been “early signs” of a rebound in interest, coinciding with a relaxation of border restrictions.

Total revenue rose 47% to $396.8 million, with earnings before interest and tax (EBIT) rising by 61% to $77.9 million and net profit after tax (NPAT) going up by 68% to $50.8 million.

Regarding India, one of the ASX growth share’s key markets, the company said it has supportive long-term demographics, wealth, and global mobility fundamentals.

The company said it’s “strongly positioned in the rebound” and its footprint is expanding in key markets.

Outgoing CEO and managing director Andrew Barkla said:

We have invested for long-term growth and are seeing the benefits of this through increased demand for our services. Our unique digital platforms and trusted human connections will ensure our people, customers and institutions benefit from even stronger support.

UBS thinks IDP Education is a high-quality business with good growth potential. It rates it as a buy, with a price target of $35.90, implying a potential upside of around 50%. The broker’s projections put the IDP Education share price at 37x FY23’s estimated earnings.

The IDP Education share price has opened 0.34% higher at $23.88 on Tuesday.

The post 2 ASX growth shares to buy this month: experts appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison 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 Idp Education Pty Ltd. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Tabcorp Holdings Limited (ASX: TAH) share price has crashed significantly lower on Tuesday morning.

In early trade, the gaming company’s shares are down a massive 82% to 93 cents.

Why is the Tabcorp share price crashing?

The good news for shareholders is that the weakness in the Tabcorp share price has nothing to do with the company’s performance or a broker downgrade.

Today’s decline has been driven by the demerger of its lottery and Keno businesses into a separate listed entity – The Lottery Corporation Limited (ASX: TLC).

This was a major part of the Tabcorp business, contributing 55% or $611 million of Tabcorp’s EBITDA in FY 2021. So, with this EBITDA removed from the Tabcorp business, its shares have fallen to reflect this.

In exchange, existing eligible shareholders have been issued shares in the Lottery Corporation.

Management notes that The Lottery Corporation is an omni-channel business with a portfolio of high profile, recognised brands and games, strong digital growth and a retail footprint across ~7,000 retail outlets/venues. This makes it one of the largest in the country.

At listing, there will be 2,225,771,703 The Lottery Corporation shares on issue. So with the company’s shares expected to open around the $5.00 mark, this will value the spin off at ~$11 billion. This compares to a ~$12 billion valuation for pre-demerger Tabcorp.

What’s left of Tabcorp?

Tabcorp has been left with its wager and media and gaming services businesses, which generated revenue of $2,493 million and EBITDA of $464 million in FY 2021.

It will be a leader in omni-channel wagering, racing and sports broadcasting, and gaming services solutions. Management believes the business is well positioned for organic growth and potential upside from possible changes in the wagering and gaming industry.

The post Why is the Tabcorp share price crashing 82%? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Here are the 3 most traded ASX 200 shares on Monday
• Here’s why the Tabcorp share price is lifting on Wednesday
• Tabcorp share price rangebound following lotto demerger vote
• Here are the 3 most heavily traded ASX 200 shares on Tuesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re wanting to bag the upcoming BHP Group Ltd (ASX: BHP) dividend, then you’ll need to act fast.

Today is the final day to buy shares to be eligible for the mining giant’s special dividend.

What is the next BHP dividend?

Last week BHP revealed that Woodside Petroleum Limited (ASX: WPL) shareholders have voted in favour of merging with the Big Australian’s petroleum assets.

This transformative deal will see Woodside become a top 10 global energy producer with over 2 billion barrels of proven and probable reserves and annual EBITDA approaching US$5 billion.

As part of the merger, Woodside is issuing BHP with 914,768,948 new shares, which have a value of approximately $26.5 billion today.

However, BHP isn’t keeping these shares, it will be distributing them to eligible shareholders via an in-specie dividend. An in-specie dividend is a dividend that is paid in assets rather than cash.

What’s next?

The latest BHP dividend will see shareholders receive one new Woodside share for every 5.534 BHP shares they hold on the ex-dividend date (Wednesday). From that date onwards, the dividends will remain with the seller if you were to buy shares. This means today is the final day to act.

It is also worth noting that any entitlement to a fraction of a Woodside share will be rounded down to the nearest whole share.

This means that if you own 200 BHP shares, you will receive 36 new Woodside shares and not 36.14 shares when they are distributed to shareholders on Wednesday 1 June. This is when the merger is expected to complete.

Those new shares will then commence normal trading on the ASX boards a day later on Thursday 2 June.

After which, BHP shareholders can look forward to the mining giant’s final dividend in September. And judging by the amount of free cash flow it is generating, this looks set to be another bumper payout for them.

The post Keen to bag the special BHP dividend? Here’s what you need to do appeared first on The Motley Fool Australia.

More reading

• What might a Labor government mean for ASX energy shares?
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• How are ASX 200 mining shares responding to the election outcome?
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Regardless of travelling sideways in 2022, the Cochlear Ltd (ASX: COH) share price has rocketed throughout the past decade.

In fact, the hearing solutions company’s shares have almost quadrupled in value, representing strong long-term growth.

During August 2021, Cochlear shares reached an all-time high of $257.76 before travelling lower soon afterwards. While the company’s shares have somewhat recovered, they are still a tad off moving again into uncharted territory for now.

Nonetheless, let’s wind the clock back and see how much you would have made if you’d invested $10,000 in Cochlear shares 10 years ago.

How much would your initial investment be worth now?

If you’d spent $10,000 on Cochlear shares this time in 2012, you would have bought them up for $61.86 each. The long-term investment would have given you approximately 161 shares without reinvesting the dividends or topping up along the way.

Looking at yesterday’s market close, the Cochlear share price finished at $219.33 apiece.

This means that those 161 shares would be worth $35,312.13 right now.

In percentage terms, the initial investment implies a return of about 253% or an average return of 13.45% per year.

On the other hand, if you’d invested the same amount into an ASX 200 index-tracking fund, this would have netted you $17,577.82.

Going back to percentages, this represents a gain of 75% or a yearly average of 5.80% across a 10-year period.

What about Cochlear’s dividends?

From 2012 to halfway through 2022, Cochlear has made a total of 19 bi-annual dividend payments to shareholders.

Its most recent dividend distribution was its third highest interim dividend declared by the board despite COVID-19 disruptions.

Adding those 19 dividend payments gives us a total amount of $25.21 per share. Calculating the number of shares owned against the dividend payments gives us a figure of $4,058.81.

When putting both the initial investment gains and dividend distribution, you would have roughly $39,370.94 or $29,370.94 profit.

As you can see, investing in Cochlear shares would have almost quadrupled what you would have gotten from investing in an ASX 200 index-tracking fund ($29,370.94 vs. $7,577.82).

Cochlear share price snapshot

Over the past 12 months, the Cochlear share price has edged 1% higher and is up around 1.5% year to date.

Cochlear has a price-to-earnings (P/E) ratio of 54.64 and commands a market capitalisation of roughly $14.19 billion.

The post Think Cochlear shares are boring? That might change when you see what $10,000 invested 10 years ago is worth now appeared first on The Motley Fool Australia.

More reading

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• Top brokers name 3 ASX shares to buy today
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Motley Fool contributor Aaron Teboneras 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 Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Medibank Private Ltd (ASX: MPL) share price is in the red year to date, but what could be on the cards for its future?

The company’s share price has slid 3.88% this year and is trading at $3.22. For perspective, the S&P/ASX 200 Index (ASX: XJO) has also dropped 3.97% so far this year.

Let’s take a look at what is happening at Medibank.

Takeover target?

Rumours have emerged that Medibank Private has been confronted with a takeover offer. A private equity firm recently approached Medibank about buying its healthcare services business, The Australian reported.

However, the publication speculated the offer may have been rejected quickly due to the company’s plans to grow healthcare services.

In a May presentation at the Macquarie conference in Sydney, Medibank CEO David Koczkar highlighted the private health insurer is building on telehealth, primary care, short stay, and home care.

Medibank highlighted in the financial year to date, resident policyholders have increased by 2.3% or 42,900 as of 30 April 2022. In FY22, the company is hoping to achieve 3.1-3.3% policyholder growth overall.

The company said: “Targeted inorganic growth for Medibank Health and Health Insurance remain areas of focus.”

Medibank recently announced it will publish full-year results on 18 August. The company’s final dividend will be paid on 22 September.

Medibank share price snapshot

The Medibank share price has ascended by almost 4% in the past year, while it is up almost 1% in the past month.

For perspective, the benchmark S&P/ASX 200 Index (ASX: XJO) has returned nearly 2% in the past year.

Medibank has a a market capitalisation of about $8.9 billion based on today’s share price.

The post The Medibank share price has struggled in 2022. Could the company be a takeover target? appeared first on The Motley Fool Australia.

More reading

• Why is the Medibank share price struggling to gain ground in May?
• Own Medibank shares? Here’s what to watch over the coming months
• How big will the Medibank dividend be in 2022?
• The Medibank share price has leapt 5% in a month. Could it be on the comeback trail in May?
• This ASX 200 healthcare share has a fully franked dividend yield over 4% right now

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Elders Ltd (ASX: ELD) share price stormed higher following the company’s half year results yesterday.

At Monday’s market close, the agribusiness company’s shares finished up 8.91% to $14.92.

For context, the S&P/ASX 200 Index (ASX: XJO) ended slightly in the green, up 0.05% to 7,148.9 points.

A quick breakdown on Elders’ half year result

In the half year report for the 2022 financial year, Elders reported double-digit growth across key financial metrics.

In summary, sales revenue soared 38% to $1,514.8 million over the previous corresponding period.

Management stated the robust performance of its rural products business was driven by pent-up demand for fertiliser and crop protection products. This came off the back of favourable seasonal conditions across key cropping regions.

On the bottom line, Elders recorded a net profit after tax (NPAT) of $91.2 million. This represents an increase of 34% from this time last year.

Based on the company’s profit above, the Elders board declared a 30% franked interim dividend of 28 cents per share. This reflects a 40% jump from the 20 cents announced in the prior comparable period.

Notably, this is the highest ever dividend that the company is set to pay to shareholders.

Management indicated that the latest dividend is consistent with its stated target dividend payout ratio of between 40% and 60%.

When can shareholders expect payment?

The Elders interim dividend will be paid to eligible shareholders roughly 3 and a half weeks away on 17 June.

However, to be eligible, you’ll need to own Elders shares before the ex-dividend date which falls on 30 May. This means if you want to secure the dividend, you will need to purchase Elders shares this Friday at the latest.

In addition, investors can elect for the dividend reinvestment plan (DRP) which will add a portion of shares to their portfolio instead. This will be based on a 10-day volume-weighted average price from 31 May to 9 June.

There is no DRP discount rate and the last election date for shareholders to opt-in is on 2 June.

The post This ASX 200 company just hiked its latest dividend by almost 70%, here’s what you need to know appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX shares today
• 3 ASX All Ordinaries shares starting the week with new 52-week highs
• Why BrainChip, Codan, Elders, and Karoon Energy are storming higher
• ASX 200 midday update: Elders and Codan rocket, Incitec Pivot disappoints
• Elders share price jumps 9% on stellar first-half profit growth

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Qantas Airways Limited (ASX: QAN) share price will be keenly watched on Tuesday after the company announced a major acquisition this morning.

The airline revealed that it had purchased a 51% stake in “fast-growing online travel business” TripADeal.

The deal gives Qantas a foot into the $13 billion online packaged holidays market, which the airline says is “experiencing significant growth as leisure demand booms”.

“This is a great opportunity at the perfect time,” said Qantas chief executive Alan Joyce.

“Coming out of the pandemic, people want a holiday experience that is special but also tried and tested, and there is a huge shift to booking online.”

Existing owners — TripADeal co-founders Norm Black and Richard Johnston plus private equity firm BGH Capital — retain minority stakes.

The acquisition price was not disclosed, although it may show up in Qantas financial reports later in the year.

The deal gives the airline an option to buy the remaining 49% in four years’ time at “an agreed multiple of TripADeal’s bookings at the time”.

The acquisition is the second in May for Qantas, which reached an agreement to buy out fellow ASX-listed company Alliance Aviation Services Ltd (ASX: AQZ) three weeks ago. The Qantas share price edged slightly into the red on the news.

Fast-growing online business

Before the COVID-19 pandemic, TripADeal reportedly had an annual growth rate of more than 40%. 

Qantas claimed the company had booked more than $200 million worth of services in the 12 months prior to the impact of coronavirus.

“It’s an Aussie success story built on delivering ready-made holidays at very sharp prices, and their level of repeat customers shows how well they do it,” said Joyce.

“Buying a majority stake at the same time means we can benefit from the strong growth that’s going to follow as a result.”

Black said TripADeal already had a close relationship with Qantas.

“Qantas understands why TripADeal is different and what makes it a success, which is why we chose to do this deal with them.”

The Qantas share price has risen 6% so far this year, and 15.7% over the past 12 months. 

Loyalty points an integral part of deal

The airline emphasised the benefits of how customers can now earn Qantas frequent flyer points through bookings made via TripADeal.

Johnston said it was a feature that would boost the online business.

“It’s taken a decade for us to build the relationships direct with suppliers to be able to offer all the experiences we have, and the ability to now use Qantas Points for that is really going to drive our growth in the years ahead.”

According to Joyce, the loyalty points business was a saviour for Qantas while its planes were grounded during the pandemic.

“Despite the lack of flying, members earned and used large volumes of points on the ground, customer satisfaction reached record levels and the business delivered strong earnings for the group,” he said.

“I don’t think any other airline loyalty program managed to do that.”

The post Qantas share price on watch after massive acquisition appeared first on The Motley Fool Australia.

More reading

• 2 ASX blue-chip shares this top fund manager thinks are good value
• ‘Never waste a crisis’: Expert picks one ASX share he’d buy right now
• Zip just joined forces with another ASX 200 company
• Ready for takeoff? Top broker sees smooth runway for Qantas shares in 2022
• 4 ASX shares of the most trusted brands in Australia

Motley Fool contributor Tony Yoo 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 Alliance Aviation Services Ltd. The Motley Fool Australia has positions in and has recommended Alliance Aviation Services Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Xero Limited (ASX: XRO) share price has seen a lot of volatility this year. Could the ASX tech share be an opportunity after its decline?

Since the beginning of the 2022 calendar year, Xero shares have fallen almost 40%. But they have recovered since 12 May – up 18% since then.

What has happened to the Xero share price?

ASX shareholders — including those of Xero — are facing uncertainty due to factors such as the Russian invasion of Ukraine, strong inflation, and the prospect of higher interest rates by central banks, including the Reserve Bank of Australia (RBA).

But earlier this month, Xero also reported its FY22 full-year result. Investors pay particular attention to the progress a business has made and its expectations for the near future, which can impact the Xero share price.

The company reported further growth. Subscribers rose by 19% to 3.27 million, which helped operating revenue rise by 29% to NZ$1.1 billion.

Average revenue per user (ARPU) went up by 7% to NZ$31.36 and the annualised monthly recurring revenue (AMRR) grew by 28% to NZ$1.23 billion.

The company’s growing scale led to the gross profit margin increasing by a further 1.3 percentage points to 87.3%.

Ongoing focus on investing for growth

Xero is focused on a number of areas to keep growing. One of the key areas is growing its customer numbers with marketing spending, which the company said had a positive impact on subscriber additions and brand awareness across its global operations.

The ASX tech share said it has taken the opportunity to develop a range of new approaches to engage with customers and partners, such as its recently announced partnership with FIFA women’s football.

Xero is also investing heavily in product design and development, which increased by 49% to $372 million, representing 33.9% of operating revenue. Management said investments in product and technology are aligned with Xero’s long-term ambitions, such as production localisation in a number of international markets and future innovation in areas such as platform, ecosystem, and integration of acquisitions.

Xero CEO Steve Vamos said:

Our strong revenue and subscriber growth gives us confidence to continue to invest for growth consistent with our long-term strategy.

Our performance reflects the quality of our customer and partner relationships as more people realise the benefits that cloud accounting and digital tools provide.

We are committed to delivering the world’s most insightful and trusted small business platform by focusing on driving cloud accounting adoption, growing the small business platform and building for global scale and innovation.

We continue to prioritise investment in building products and growing partnerships by investing cash generated to help deliver our strategy, drive long-term growth and meet customer needs.

Is the Xero share price good value?

Brokers are somewhat mixed on the business.

Citi thinks Xero is a buy, with a price target of $108, with one positive being the potential growth in the UK as businesses go digital with taxation compliance.

However, UBS rates the business as a sell with a price target of just $70. The broker noted that cash flow is low (Xero made NZ$2 million of free cash flow in FY22). However, it also noted that changes in the foreign currency could help revenue in FY23.

The Xero share price closed at $90.48 on Monday.

The post Do experts think the Xero share price is a buy? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison 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.

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