Assessing SAP (XTRA:SAP)’s Valuation After Its Recent Share Price Pullback
SAP (XTRA:SAP) has been drifting lower in recent months, and that pullback is starting to catch investor attention. With shares down double digits year to date, the key question is whether fundamentals still justify a fresh look.
See our latest analysis for SAP.
That slide in the share price, now around $210.1, comes after a strong multi year run. Recent weakness suggests momentum has cooled as investors reassess growth expectations and macro risk, even though the three year total shareholder return remains robust.
If SAP’s recent pullback has you reassessing your tech exposure, this could be a good moment to explore other high growth tech and AI stocks that might offer a different mix of growth and resilience.
With double digit declines despite solid double digit profit growth and a sizeable gap to analyst targets, the real debate now is simple: is SAP trading below its true worth, or is future growth already fully priced in?
Most Popular Narrative Narrative: 27% Undervalued
With SAP last closing at €210.1 against a narrative fair value near €286.75, the current gap sets up a punchy valuation debate.
The accelerating global push for digital supply chain resilience and business process digitalization is enlarging SAP's addressable market, as evidenced by record cloud backlog, robust new pipeline development (including post Sapphire event momentum), and consistently strong double digit growth in cloud ERP.
Want to see the math behind this confidence gap? The narrative focuses on powerful growth, higher margins, and a future earnings multiple that might surprise you.
Result: Fair Value of $286.75 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, execution missteps around complex cloud migrations, or heavier than expected regulatory and compliance costs, could quickly erode the upside implied by this narrative.
Find out about the key risks to this SAP narrative.
Another View: Multiples Tell A Richer Story
While narrative fair value points to upside, the current price already bakes in a punchy earnings multiple. SAP trades on about 34.5 times earnings versus 31.2 times for peers and 25.8 times for the wider European software group, even if that is below its 38 times fair ratio.
This means the stock is cheap relative to where its ratio could move, but expensive versus the sector today. Investors are left to decide whether they are being paid enough for that valuation risk.
See what the numbers say about this price — find out in our valuation breakdown.
Build Your Own SAP Narrative
If you see things differently or simply want to dig into the numbers yourself, you can build a tailored SAP view in under three minutes, starting with Do it your way.
A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding SAP.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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