Investors may consider adding Guidewire Software GWRE to their portfolio to tackle the current macroeconomic and geopolitical uncertainties and benefit from its solid fundamentals and growth prospects.
Let’s look at the factors that make the stock an attractive pick:
Attractive Pricing: Wall Street is facing extreme volatility due to macroeconomic factors such as rising inflation and interest rate hikes by the Federal Reserve, the ongoing Russia-Ukraine war, increased crude oil prices and lingering supply-chain woes.
The abovementioned factors are taking a toll on major U.S. indices. Year to date, the S&P 500 has declined 16.8%. In such a scenario, stocks such as GWRE can be a sound addition to one’s investment portfolio.
The stock is down 51.4% from its 52-week high level of $119.46 on Nov 30, 2021, making it relatively affordable for investors.
Guidewire Software, Inc. Price
Guidewire Software, Inc. price | Guidewire Software, Inc. Quote
Solid Rank: GWRE currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Robust Estimates: The Zacks Consensus Estimate for 2023 and 2024 earnings is pegged at a loss of 32 cents and earnings of 3 cents per share compared with the year-ago figures of a loss of 51 cents and a loss of 32 cents per share, respectively.
Also, revenues for 2023 and 2024 are estimated to be $887.4 million and $984.6 million, indicating year-over-year growth of 9.2% and 11%, respectively.
The company reported non-GAAP earnings of 3 cents per share in fourth-quarter fiscal 2022 (ended Jul 31, 2022), surpassing the Zacks Consensus Estimate of a loss of 4 cents. However, this compares unfavorably with the year-ago quarter’s non-GAAP earnings of 37 cents per share.
The company reported revenues of $244.6 million, rising 7% year over year and beating the Zacks Consensus Estimate by 6.6%.
Guidewire has an impressive surprise record. Earnings outpaced the Zacks Consensus Estimate in all of the trailing four quarters, the average being 61.6%.
Solid Business Model: Headquartered in San Mateo, CA, GWRE is a provider of software solutions for property and casualty (P&C) insurers.
The company’s performance is gaining from higher revenue growth across subscriptions and services segments. Guidewire Cloud continues to gain momentum with 16 cloud deals in the fiscal fourth quarter, taking the count to 40 for the full year.
The company’s focus on enhancing the Guidewire Cloud platform with new capabilities is expected to boost sales of subscription-based solutions.
The company’s acquisition of Cyence has also allowed the company to provide an entire life cycle to the insurance products starting from designing to transaction management.
The company expects fiscal 2023 ARR revenues to grow owing to new sales and deal ramps. For fiscal 2023, ARR is expected to be between $745 million and $760 million.
For first-quarter fiscal 2023, revenues are expected in the range of $190-$195 million. ARR is expected to be between $667 million and $670 million.
The company’s shareholder-friendly initiatives are noteworthy as well. In September 2022, the company entered into an accelerated share repurchase (ASR) agreement with Morgan Stanley & Co. LLC to buy back an aggregate of $200 million worth of its common stock. Per the ASR agreement, Guidewire is expected to receive an initial delivery of approximately 2,581,478 shares. The remaining shares are expected to be settled in the third quarter of fiscal 2023.
Prior to that, the company had announced that its board of directors had authorized a share repurchase program of up to $400 million.
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. As of Jul 31, goodwill and net intangible assets consisted of 17.4% of total assets.
Other Stocks to Consider
Some other top-ranked stocks from the broader technology space are Arista Networks ANET, Plexus PLXS and Jabil JBL, each presently sporting a Zacks Rank #1.
The Zacks Consensus Estimate for Arista Networks 2022 earnings is pegged at $4.37 per share, up 8.2% in the past 60 days. The long-term earnings growth rate is anticipated to be 17.5%.
Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 12.7%. Shares of ANET have jumped 9.8% in the past year.
The Zacks Consensus Estimate for Plexus' 2023 earnings is pegged at $5.98 per share, rising 8.9% in the past 60 days.
Plexus’ earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 17.5%. Shares of PLXS have gained 24.9% in the past year.
The Zacks Consensus Estimate for Jabil’s fiscal 2023 earnings is pegged at $8.18 per share, rising 4.1% in the past 60 days. The long-term earnings growth rate is anticipated to be 12%.
Jabil’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 9.3%. Shares of JBL have soared 17.7% in the past year.
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