Morningstar

Xero Ltd

XRO: XASX (AUS)

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Morningstar Rating for Stocks	Fair Value	Economic Moat	Capital Allocation
	A$19.00	Rtnffq	Gqqzvwhk

Coronavirus Related Economic Slowdown Could Disproportionately Impact Xero

Mar 16, 2020

Business Strategy and Outlook

Xero has grown quickly since incorporation in 2006 to become the largest provider of accounting software as a service, or SaaS, to the SME market in Australia and New Zealand. We expect the company to continue leveraging this strong position to expand quickly in other regions such as the United Kingdom and the United States. Current losses are an acceptable price to pay for rapid growth and associated strategic benefits, and we forecast a maiden profit in fiscal 2020. The capital-light business model should enable returns on invested capital, or ROICs, to comfortably exceed the weighted average cost of capital, or WACC, from fiscal 2020, supporting our narrow economic moat rating.

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