Australia's 'magnificent 2' stocks: Soaring and still buys

These two stock are, in my view, a pair of the ASX's best shares.

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A few years ago, it was generally accepted that the ASX had five magnificent tech stocks. Collectively known as WAAAX, these five companies were considered the ASX's answer to the American FAANG group, which has now morphed into the 'magnificent seven'.

How times have changed. Of those five magnificent tech stocks, three have either left the ASX or dropped out of favour. Interestingly, those three are the 'As' in WAAAX.

Afterpay is now part of Block Inc (ASX: SQ2).

Appen Ltd (ASX: APX) is now a penny stock. It has fallen more than 97% from its 2020 peak.

Altium has also left the ASX boards after being swallowed by the Japanese Renesas Electronics Corporation (TYO: 6723).

But the remaining WAAAXers remain, in my opinion, Australia's 'magnificent two' ASX tech stocks. They are the WAAAX book enders WiseTech Global Ltd (ASX: WTC) and Xero Ltd (ASX: XRO).

Why? Well, these companies just can't seem to stop growing. Both have years of impressive revenue growth and rising user bases.

Australia's 'magnificent two' tech stocks dazzle investors

Take Xero. The online accounting software provider was an early reporter this year. It delivered its full-year results back in May for its 2024 financial year.

As we covered at the time, Xero reported a 22% rise in operating revenue to NZ$1.71 billion for the 12 months to 31 March 2024. That was enabled by both a 419,000 spike in subscribers and a 14% increase in the company's average revenue per user to NZ$39.29. For the year, Xero finished with banking a net profit after tax of NZ$174.6 million. That was up from a net loss of NZ$113.5 million the previous year.

WiseTech arguably impressed even more.

When this logistics solutions provider dropped its FY2024 earnings last month, investors were delighted to learn that Wisetech's revenues increased by 22% over the 12 months to 30 June, 28% to $1.04 billion.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at $496 million, also up 28% year-on-year. That enabled the company to report an underlying net profit after tax (NPAT) of $284 million, a 15% increase.

Unlike Xero, Wisetech also pays a dividend. Shareholders were treated to a 10% hike in income with a final (and fully franked) dividend of 9.2 cents per share in the pipeline.

Foolish takeaway

A company reporting revenue growth of 20% is arguably worthy of a closer look in any scenario. But the fact that both companies' earnings merely continued the trend that they have been on for many years now speaks to their underlying quality.

In my opinion, this is more than enough to cement these two stocks as Australia's 'magnificent two' tech shares right now.

Motley Fool contributor Sebastian Bowen 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 Appen, Block, WiseTech Global, and Xero. The Motley Fool Australia has positions in and has recommended WiseTech Global and 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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