My analysis, page-9

@EmDe
Please let us know how the new Xero HQ looks when it comes to your practice at the end of the month.

I have had a look at the blog and in from what I can see and imagine it looks like an absolute game changer for accountants. It also supports my view (though I hope not just confirmation bias) that the technological moat will widen as Xero starts generating cash and the likes of Sage, MYOB are left behind. Even Intuit has been late to recognize the importance of the channel distribution strategy and are now paying lip service whereas Xero appears to really get the industry and what it wants and appears to generally want to make life easier for everyone in it. Eg, recognize that they are cannibalising traditional bookkeeping and telling their partners early on to switch from time based billing to value pricing, actively educating its users etc etc.

On a separate note the Xero valuation is starting to look compelling again. With P/S ratio of 7, which I can see being reasonable for a very long time (5+ years given the runway), there is limited room for further downward pressure. I see an absolute fundamental floor at 5x trailing PS ratio (this would be in a really bad bear market and IMO represent conpelling value) and a PS ratio of 4-5 when more mature (<30%yoy revenue growth). I actually see 7 to be a very reasonable (and it may even increase once Xero becomes cash flow positive), which if maintained means that the shareprice will essentially follow Xeros own revenue trajectory. Up until now Xeros shareprice really had the tailwinds of the tech boom and bust running against it, and the legacy of its ultra market valuation previously.