Guidewire (GWRE) Surges 55.2% YTD: Will the Trend Continue?
Guidewire Software GWRE is witnessing healthy momentum this year so far. Shares of the company have gained 55.2% year to date compared with the sub-industry’s growth of 20.5%.
The company is a leading provider of software solutions for property and casualty (P&C) insurers. Further, it offers Guidewire InsuranceSuite and Guidewire InsuranceNow, which provide solutions to support the entire insurance lifecycle.
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Catalysts Behind the Price Surge
This Zacks Rank #3 (Hold) company’s performance is gaining from higher revenue growth across the subscription and support business segment. We expect subscription and support revenues to witness 26% year-over-year growth in fiscal 2024.
The company’s focus on enhancing the Guidewire Cloud platform with new capabilities is expected to boost sales of subscription-based solutions. Guidewire Cloud continues to gain momentum with 17 cloud deals in the fiscal fourth quarter.
Apart from this, the company is benefiting from the rapid uptake of its InsuranceSuite and PolicyCenter by leading insurance companies. In November, the company announced that Skadeförsäkring selected Guidewire InsuranceSuite on Guidewire Cloud to improve its IT operations and accelerate business growth. Prior to that, the company announced that Heffernan Insurance Brokers California selected Guidewire HazardHub to boost its P&C business.
The company’s capital allocation strategy to enhance long-term shareholders’ value is noteworthy. In the fiscal fourth quarter, the company repurchased 604,614 shares for $45.8 million at an average price of $75.77 per share.
Few Headwinds Persist
Apart from its solid fundamentals, the company is prone to a few risks. The company’s products and services are only meant for P&C insurers. This leads to a lack of product diversification. Also, frequent acquisitions made by the company lead to rising integration risks.
Going ahead, the company expects license revenues to decline due to steady progress on cloud migrations. Rising research and development costs owing to cloud customer upgrades are additional headwinds.
A Look at Estimates
The company’s earnings are expected to increase 111.4% and 81.5% on a year-over-year basis in fiscal 2024 and 2025, respectively. The Zacks Consensus Estimate for fiscal 2024 and 2025 earnings has improved 29.8% and 21.8%, respectively, in the past 90 days.
GWRE’s fiscal 2024 and 2025 revenues are anticipated to rise 8.5% and 11.8% year over year, respectively.
Stocks to Consider
Some better-ranked stocks in the broader technology space are Pegasystems PEGA, Flex FLEX and Watts Water Technologies WTS. Pegasystems and Flex presently sport a Zacks Rank #1 (Strong Buy), whereas Watts Water Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Pegasystems’ 2023 EPS has improved 21.2% in the past 60 days to $1.77. PEGA delivered an average earnings surprise of 1,250.2% in the trailing four quarters. Shares of PEGA have jumped 38% in the past year.
The Zacks Consensus Estimate for Flex’s fiscal 2024 EPS has increased 3.6% in the past 60 days to $2.56. Flex’s long-term earnings growth rate is 12.4%.
Flex’s earnings outpaced the Zacks Consensus Estimate in each of the last four quarters, the average earnings surprise being 11%. Shares of the company have risen 27.9% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies 2023 EPS has improved 2.8% in the past 60 days to $8.00. Watts Water’s long-term earnings growth rate is 7.8%.
WTS’ earnings outpaced the Zacks Consensus Estimate in each of the last four quarters, the average earnings surprise being 11.8%. Shares of WTS have rallied 24.2% in the past year.
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Flex Ltd. (FLEX) : Free Stock Analysis Report
Guidewire Software, Inc. (GWRE) : Free Stock Analysis Report
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Pegasystems Inc. (PEGA) : Free Stock Analysis Report
