Guidewire Software Inc (GWRE, Financial) recently experienced a daily gain of 10.93% and a 3-month gain of 28.98%. Despite reporting a Loss Per Share of 1.87, the question arises: is the stock modestly undervalued? This article aims to answer this question by conducting a thorough valuation analysis of Guidewire Software. We invite you to read on and discover the intrinsic value of this stock.
A Glimpse into Guidewire Software's Operations
Guidewire Software Inc (GWRE, Financial) provides software solutions for property and casualty insurers. Its flagship product, InsuranceSuite, offers a comprehensive system of record, including claims management, policy management, and billing management. With its current stock price at $94.11 and a GF Value of $125.52, Guidewire Software appears to be modestly undervalued. Let's explore this further.
Understanding the GF Value
The GF Value is a proprietary measure that estimates a stock's intrinsic value based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the stock's 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 the price is significantly below the GF Value Line, the stock is likely undervalued, implying potentially higher future returns.
According to the GF Value, Guidewire Software (GWRE, Financial) appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
Financial Strength of Guidewire Software
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before purchasing shares. Guidewire Software has a cash-to-debt ratio of 1.59, ranking worse than 58.69% of companies in the Software industry. However, its overall financial strength is 7 out of 10, indicating fair financial health.
Profitability and Growth of Guidewire Software
Investing in profitable companies, especially those with consistent profitability over the long term, is typically less risky. Guidewire Software has been profitable for 6 of the past 10 years. However, its operating margin of -21.34% ranks worse than 73.45% of companies in the Software industry. Its overall profitability rank is 5 out of 10, indicating fair profitability.
Regarding growth, the average annual revenue growth of Guidewire Software is 3.8%, ranking worse than 60.98% of companies in the Software industry. The 3-year average EBITDA growth is 0%, ranking worse than 0% of companies in the Software industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) is another way to assess its profitability. Over the past 12 months, Guidewire Software's ROIC was -12.48, and its WACC was 10.73.
Conclusion
In conclusion, Guidewire Software (GWRE, Financial) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is fair. However, its growth ranks worse than 0% of companies in the Software industry. For more detailed financial information on Guidewire Software, check out its 30-Year Financials here.
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