Shares of ASX-listed Xero Limited (AU:XRO) soared to an all-time high after delivering stellar growth in the first half of FY25. The company reported a 51% year-over-year growth in its EBITDA (earnings before interest, tax, depreciation, and amortization) to NZ$311.7 million. After the release of the results, XRO stock gained over 6% as of writing.
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Xero offers cloud-based accounting software to small businesses.
Xero Reports Strong H1 Numbers
In the first half, Xero’s operating revenue increased 25% to NZ$995.9 million. The company’s strong performance was well-supported by a 6% rise in subscribers, reaching 4.2 million. Meanwhile, the average revenue per user (ARPU) grew 15% to NZ$43.08 compared to the same period last year.
Furthermore, the company generated NZ$208 million in free cash flow with a cash flow margin of 21%, a notable rise from 13.3% in H1 FY24.
Driven by its strong numbers, the company again surpassed the benchmark “Rule of 40” with a score of 43.9% from 33.6% in the prior year period. The Rule of 40 combines a company’s annual revenue growth rate (adjusted for currency changes) with its free cash flow margin. A score of 40% or more is considered to be healthy.
Analysts React with Positive Ratings
Following the results, analysts from UBS and Macquarie confirmed their Buy ratings on the stock. Darren Leung from Macquarie predicts a growth of 10.02% in the share price. However, Citi analyst Lucy Huang foresees a modest upside of 2.14%.
Year-to-date, XRO stock has grown by over 50%, driven by the company’s continued revenue and earnings growth.
Is Xero a Good Stock to Buy?
As per the consensus among analysts on TipRanks, XRO stock has been assigned a Strong Buy rating based on 11 Buy and two Hold recommendations. The Xero share price target is AU$157.32, which is 8.16% below the current level.
