SAP AG has been in public trading since 1988 with shares listed on the Frankfurt and Stuttgart stock exchanges. In 2014, SAP changed from an AG to a European Company (Societas Europaea or SE) and has been officially trading SAP SE stock since then.
In a recent report by Simply Wall St, a finance and investing website that provides a new platform for tracking stocks and visualizing stock data, there was a significant share price rise of over 20% in the past couple of months on the DB for SAP SE stock. This could be attributed to the recent development in the company’s outlook. Simply Wall St analyzed the most recent data on SAP’s outlook and valuation to see the future opportunities for investors and shareholders.
According to the valuation model of Simply Wall St, SAP SE stock is fairly valued at the moment trading around 8.02% above intrinsic value. This translates to a reasonably priced investment if you buy SAP today, which means the downside is almost insignificant when the price falls to its real value knowing that you only bought the stock at €115.26.
The opportunity for investment lies on SAP beta (a measure of share price volatility) being high, which means that its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
The Future Outlook
The future is bright for SAP with earnings expected to increase by 88% in the next few years, leading to more robust cash flows, feeding into higher share value. For most investors, this is an important fact to consider especially in growing one’s portfolio. Value investors would argue that the intrinsic value relative to the price still matters the most. However, a more compelling investment thesis would be the high growth potential at a cheap price. A scenario that SAP SE seems to project now.
In the analysis done by Simply Wall St earlier this year with regard to SAP’s growth expectations, by 2022, SAP’s earnings should reach €5.8b, from current levels of €4.1b, resulting in an annual growth rate of 12%. This leads to an EPS of €4.85 in the final year of projections relative to the current EPS of €3.42. With a current profit margin of 17%, that is expected to bring in a margin of 18% by 2022.
Points to Ponder
Whether you’re a shareholder or an investor, here are some points to ponder when considering SAP SE stock at this time:
• Shares are trading around its fair value where it seemed that the market has already priced in SAP’s positive outlook
• The track record of its management team
• The possibility of the price dropping below its fair value
• Since the positive outlook is encouraging for the company, consider diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop
Though the price is, more often than not, a major factor in every stock option, it is equally substantial to pay close attention to the ebbs and flows of the stock market, which means spending time identifying and monitoring stocks that are worthy of your investment. Are you ready to take the high stakes with high beta stocks or are you keen on investing in defensive stocks where risks and returns are low? Is it really worth investing on SAP SE today? Consider this, SAP ranked 8 in the Thomson Reuters World’s 100 Global Technology Leaders in 2018.