Xero No1 on Forbes list

Rod Drury says Xero's No1 innovation ranking is "absolutely huge". Photo / Mark Mitchell

Forbes magazine's ranking a big boost in drive to expand into America, Drury says.

Xero topping the Forbes list of the world's "most innovative growth companies" is a "massive endorsement" which the cloud accounting firm can use in building its United States profile, says chief executive Rod Drury.

Forbes, an influential American business publication, released the list this week and ranked Xero at No1.

Drury, who is focused on Xero's push into the United States market, said the accolade puts the company "on the radar".

"It's the dream thing to be at the top of a Forbes list. As we're investing in the US market, we're trying to ... get our brand out there.

"To say, 'We're No1 on the Forbes global innovation list', is just absolutely huge, it helps right across the business."

The list put Xero's "innovation premium" at 91.7 per cent.

"The innovation premium is a measure of how much investors have bid up the stock price of a company above the value of its existing business based on expectations of future innovative results," Forbes said.

Technology commentator Ben Kepes - who has previously advised Xero - didn't question whether or not the software company was innovative but said there were better ways than the Forbes method to measure this.

"Conflating a muliplier between revenue and valuation as some sort of proxy for innovation seems bizarre to me," Kepes said.

Drury said he didn't care about the measure Forbes used.

"The fact is it's a massive endorsement of what we're doing."

Forsyth Barr senior equity analyst Blair Galpin said it was great that Xero was on the list, but people shouldn't read too much into it.

"It's a sentiment measure, isn't it?" he said. "Those who are investing in Xero are great believers that it's going to do very well ... there's a lot of belief built into the Xero story."

Xero's share price fell 0.83 per cent yesterday to $32.23. Despite its tumble from March's record high, the price is up 132 per cent from this time last year.

Forbes' list excluded businesses with a market capitalisation of more than US$10 billion or those that spent less than 1 per cent of their asset base of research and development.

It also included only businesses with seven years of public data available.

Xero yesterday confirmed its loss for the year to March was $35.5 million. In April it said it expected a full-year loss of about $35 million.