Today we're going to take a look at the well-established SAP SE (NYSE:SAP). The company's stock had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of €103.69 to €112.72. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at SAP’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for SAP SE
What is SAP worth?
SAP appears to be overvalued by 54% at the moment, based on my discounted cash flow valuation. The stock is currently priced at €112.72 on the market compared to my intrinsic value of €73.15. This means that the opportunity to buy SAP at a good price has disappeared! Another thing to keep in mind is that SAP’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of SAP look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at SAP future expectations. With profit expected to grow by 60.12% over the next couple of years, the future seems bright for SAP. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in SAP’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe SAP should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on SAP for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for SAP, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on SAP SE. You can find everything you need to know about SAP in the latest infographic research report. If you are no longer interested in SAP SE, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.