Why I think WiseTech Global shares are a buy

Here's why I think it's worth buying shares in WiseTech Global Ltd (ASX: WTC).

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The WiseTech Global Ltd (ASX: WTC) share price may not have had the same astronomical growth trajectory as some of its WAAAX compatriots, but I think WiseTech shares make a compelling long-term buy.

As our global economy continues to grow, logistics, the process of manufacturing and delivering products to the end consumer has grown more complex. This is where WiseTech Global has carved out a very successful niche in the global market.

What does WiseTech Global do?

WiseTech Global is a leading global developer and provider of software solutions to the logistics industry, and is a member of Australia's WAAAX tech share group. Its customers include more than 12,000 of the world's logistics companies across over 150 countries.

WiseTech Global simplifies the complexity of logistics by allowing users to manage operations on a single database, via its flagship product CargoWise One. Its platform can be tailored for each customer's supply chain and provides services such as customs brokerage, HR management, and online tracking and tracing.

CargoWise One is not a traditional subscription-based software-as-a-service (SaaS) product. Instead, WiseTech Global generates revenue depending on the customer's utilisation of the software, enabling WiseTech Global to grow along with its customers. CargoWise One has an extremely high 99% retention rate.

Rapid growth continues

WiseTech Global continues to grow at a rapid pace, in both size and scale via organic growth and targeted acquisitions.

In January, WiseTech Global acquired Switzerland-based SISA Studio Informatica SA, a leading customs and freight forwarding solutions provider. This acquisition consolidates WiseTech Global's geographic foothold in customs clearance and border compliance.

In December last year, WiseTech acquired Ready Korea, a leading customs, bonded warehouse, and trade compliance solutions provider in South Korea. The acquisition should strengthen WiseTech's international reach across Asia, assisting it to further develop cross-border logistics solutions for its regional and global customers.

These 2 acquisitions followed 15 other geographic and adjacent acquisitions it has made across Europe, Asia, Australasia and the Americas since 2018. Moving forward, WiseTech Global will continue to execute on smaller European economies and key remaining markets in Asia.

For the 12 months ending June 2019, WiseTech Global recorded revenue of $348 million and net profit after tax of $54 million, a 57% and 33% annual increase, respectively, driven by significant organic growth in revenues across its global business.

WiseTech Global has achieved a 49% compound annual growth rate over the last 4 years and has maintained a very strong profit margin of 48%.

Last November, WiseTech Global confirmed that its revenue for the following year is forecast to be between $440 and $460 million, with earnings before interest, tax, depreciation and amortisation of between $145 and $153 million.

Foolish takeaway

Although WiseTech Global is currently trading on relatively high price-to-earnings ratio and there has been a lot of recent market commentary regarding short-selling of the share, I don't think this should put you off taking a stake in a very high-quality tech share that has great prospects over the next 5–10 years.

Factored into the WiseTech share price are very high expectations for growth over the next 12 months, so market volatility may continue in the short term. However, long-term I believe that the addressable market for WiseTech's products will only grow, and once it has integrated its recent global acquisitions it will have an excellent launching pad for future growth.

At the time of writing, WiseTech shares are down 3.06%, trading for $24.11 per share.

Other Australian tech shares that you might want to also consider investing in include Xero Limited (ASX: XRO), Appen Ltd (ASX: APX), Afterpay Ltd (ASX: APT) and REA Group Limited (ASX: REA).

Phil Harpur owns shares of AFTERPAY T FPO, Altium, Appen Ltd, REA Group Limited, WiseTech Global, and Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. The Motley Fool Australia owns shares of Altium, Appen Ltd, WiseTech Global, and Xero. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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