Unveiling Sapiens International NV (SPNS)'s Value: Is It Really Priced Right? A Comprehensive Guide
The stock of Sapiens International Corp NV (NASDAQ:SPNS) experienced a daily loss of -5.98%, with a 3-month gain of 3.54%. The company's Earnings Per Share (EPS) stands at 1.02. But the question remains: is the stock modestly undervalued? This article delves into an in-depth valuation analysis of Sapiens International NV (NASDAQ:SPNS) to answer this question.
Company Introduction
Sapiens International Corp NV is a leading provider of software solutions for the insurance industry, with a growing focus on the financial services sector. The company offers software, solutions, and professional services for various insurance and financial markets, with a majority of its income derived from the North American region. With a current stock price of $27.06 per share, and a market cap of $1.50 billion, the company's value compared to its GF Value, an estimation of its fair value, indicates that it may be modestly undervalued.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line serves as an indicator of the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Based on the GuruFocus Value calculation, Sapiens International NV (NASDAQ:SPNS) appears to be modestly undervalued with a GF Value of $31.09. Given its current market cap of $1.50 billion, the stock's future return is likely to be higher than its business growth due to its relative undervaluation.
Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before purchasing shares. Sapiens International NV has a cash-to-debt ratio of 2.02, ranking worse than 54.04% of 2722 companies in the Software industry. However, its overall financial strength is 8 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Sapiens International NV has been profitable for 10 years over the past 10 years. Its operating margin of 14.56% is better than 81.2% of the companies in the Software industry. Overall, GuruFocus ranks Sapiens International NV's profitability as strong.
Growth is a crucial factor in the valuation of a company. The 3-year average annual revenue growth rate of Sapiens International NV is 9.9%, which ranks better than 54.26% of 2396 companies in the Software industry. The 3-year average EBITDA growth rate is 12.4%, ranking better than 55.34% of 1986 companies in the Software industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Sapiens International NV's ROIC was 13.02, while its WACC came in at 9.76.
Conclusion
In summary, the stock of Sapiens International NV (NASDAQ:SPNS) appears to be modestly undervalued. The company's financial condition is strong, and its profitability is strong. Its growth ranks better than 55.34% of 1986 companies in the Software industry. To learn more about Sapiens International NV stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
