Insights

This ASX tech company’s shares could be among those to watch over the next few years

Despite a topsy-turvy start to life on the ASX, New Zealand-based tech company Eroad Ltd (ASX:ERD) is positioning itself for future growth.
The post This ASX tech company’s shares could be among those to watch over the next few years appeared first on The Motley Fool Australia. –

woman watching asx share price on digital screen

Little-known New Zealand-based tech company Eroad Ltd (ASX:ERD) has had an interesting first few months on the ASX. The company’s shares only began trading on the ASX in September. At the time, the Eroad share price was trading around $4 before it surged as high as $5.19. However, by January it has fallen off again. They have now shed almost 15% of their value. Currently, they are trading back at $4.40, giving the company a modest market cap of $360 million.

Company Background

The company develops tracking technology for the freight and logistics industries. Eroad’s telematics systems help companies oversee and manage their vehicle fleets. In addition, the systems also provide individual drivers with feedback and coaching to improve safety and performance. Eroad’s technology can even help companies manage their fringe benefit tax and fuel tax credit obligations.

Eroad’s Financial Performance

In the company’s most recent financial results for the six months ending 30 September 2020 it reported a 19% jump in revenues versus the prior comparative period (to NZ$45.8 million). Earnings before interest, tax, depreciation and amortisation expenses (EBITDA) increased 29% to NZ$15.3 million, but was flat against the prior half due to accelerating investment in research and development.

The company was impacted by COVID-19 lockdowns during the period, with sluggish growth across both Australia and North America. However, in Eroad’s home market of New Zealand, the effects from coronavirus were less severe. New Zealand revenues jumped by 13% half-on-half to $27.4 million.

Recent News

Eroad recently released an operational update for the December quarter. In it, the company reported that it had sold an additional 1,284 contracted units during the period. This reflects growth in New Zealand and Australia. Total Australian units increased by 10% quarter-on-quarter, outpacing growth in New Zealand (albeit off a much smaller base) with most sales made to small to medium-sized businesses. Eroad has stated that it is now targeting larger enterprises in Australia. In addition, the company hopes to land at least one major contract in the fourth quarter.

However, there continue to be significant headwinds in the North American market, with contracted unit numbers there declining slightly during the quarter.

Outlook for Eroad

Despite continuing challenging conditions in North America, Eroad anticipates a slight increase in revenues for the second half. EBITDA should come in roughly equal to the first half, reflecting the company’s continued investment in product development and marketing.

Eroad does forecast a strengthening growth runway over the next few years. It believes the rate of revenue growth will start to increase during FY22, but continued R&D investment (at a rate of around 24% to 27% of FY22 revenues) should accelerate growth even faster in FY23 and FY24. That could mean Eroad will be an ASX tech company to watch over the next few years.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post This ASX tech company’s shares could be among those to watch over the next few years appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!