The WiseTech Global Ltd (ASX: WTC) share price has been on a downwards trend which began in September last year but has accelerated over the past couple of weeks.
Since reaching an all-time high of $38.80 last September, the ASX tech share has now lost 65.26% of its value. This has been driven by a short report and more recently, concerns regarding the impact of the coronavirus.
So, in the current ASX correction, does this beaten-down tech share present a good buying opportunity to astute investors?
Strong recent financial results
Despite the tough time WiseTech has had on the market recently, it's interesting to see that its recent performance hasn't been bad at all.
Last month, WiseTech reported a 31% increase in revenue to $205.9 million in 1H20 compared to $156.7 million in 1H19. Net profit also grew very strongly by 160% to $59.9 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) has nearly doubled for the company since 1H18 while its EBITDA margin on the CargoWise platform has risen to 49%.
This result was below market expectations and some of WiseTech's growth can be attributed to recent acquisitions. However, I think it's very important to note that WiseTech is still growing very strongly, an indication that the underlying fundamentals of the company are still very strong.
Between 1H16 and 1H20, its revenues have actually grown at a compound annual growth rate of 43%, fuelled by both organic and acquisitive growth. I think few companies wouldn't be happy with that level of growth.
The company remains focused on investing strongly for future growth which is, in my mind, another sign of strong underlying business. In the last 5 years alone, WiseTech has invested over $360 million in product innovation.
The company continues to diversify its customer base. Overall, 40 of the top 50 global third-party logistics providers, and all of the top 25 global freight forwarders, use WiseTech's core product, CargoWise One.
Impact of coronavirus
There is no doubt that the impact on WiseTech's supply chains related to the Chinese market has hampered growth significantly over the short term.
The coronavirus is closing manufacturing and delaying trade. US imports from Asia have been falling and container departures have slumped across Asia, particularly from China.
Taking into account the anticipated impact of coronavirus on exports and trade, WiseTech provided full-year revenue guidance of $420 million – $450 million, representing growth of 21-29% over FY19. Meanwhile, the company expects EBITDA in the range of $114 million – $132 million, representing growth of 5-22%.
Are WiseTech shares a buy?
Despite its recent market challenges with respect to China, I think that the harshness of the market's response to WiseTech's challenges hasn't been fully justified.
WiseTech Global remains the leading global developer and provider of software solutions to the logistics industry. The company also has a strong and entrenched position in the market, with strong growth prospects over the next five years.
As a result, I think that the recent share price correction presents patient investors with an opportunity to purchase WiseTech shares at a relatively cheap price right now.
