The WiseTech Global Ltd (ASX: WTC) share price has hit a new all-time high this morning of $38.80. After opening at $37.85, WiseTech shares quickly exceeded the previous all-time high of $37.99 (set on Tuesday) and have settled at $38.39 at the time of writing. This has happened despite the company going ex-dividend today. WiseTech shares are now up an extraordinary 41% over the last three weeks and 122% for the year.
So does this mean WiseTech shares are overvalued at these prices? Let's see for ourselves.
What does WiseTech Global do?
WiseTech is one of the WAAAX group – the ASX's most beloved tech darlings. The company specialises in end-to-end, cloud-based software solutions for the logistics industry through its CargoWise One platform, which more than 12,000 logistics firms across 130 countries use.
Why has WiseTech's share price been climbing?
Like any growth stock, good news keeps the share price fire burning. In its recently reported 2019 financial year results, the company booked an increase in revenue of 57% to $348.3 million and a 33% lift in profits after tax to $54.1 million. Not content with these numbers, management has issued guidance that it expects further revenue growth of 26% – 32% in FY20.
On the surface, WiseTech looks grossly overvalued on these numbers. Consider that this is a company that has just booked an after-tax profit of $54.1 million but is valued at $12.28 billion on today's pricing. If we take WiseTech's earnings of $108.1 million and obtain a price-to-earnings ratio (a common method of valuing a stock) – we come out with 218. If we also consider that the current market average is around 17.5, WiseTech is looking beyond frothy and I would even consider using the dreaded B-word.
Foolish takeaway
Even if we consider WiseTech is a company of the highest calibre, has a massive growth runway, the numbers to back it up and a sticky product with a remarkably low rate of customer churn (less than 1%), it's impossible for me (personally) to justify entering this stock at this pricing at all. Considering WiseTech's 52-week low is $14.88 as well (which is 60% less than today's price), I think there will be better buying opportunities in the future on this one. Patience grasshopper, patience.
