SAP (XTRA:SAP) Stock Dip Sparks a Fresh Look at Its Current Valuation

SAP (XTRA:SAP) has made waves with its recent stock movements, giving investors a reason to pause and reconsider where it stands in their portfolios. While there has not been a headline-grabbing news event, this kind of price action—especially without a clear catalyst—often prompts the question of whether the market is signaling something that fundamentals alone do not show. This situation can catch even seasoned investors off guard, prompting many to re-examine SAP’s underlying value story.

Looking at the bigger picture, SAP’s share price has climbed 19% over the year, outpacing the overall market. However, after a period of strong momentum, the past month has been less favorable, with the stock retreating more than 10%. This pullback follows years of strong three- and five-year gains along with double-digit annual revenue and income growth, even as near-term sentiment has cooled somewhat.

Is the market offering investors a rare chance to buy into SAP at a lower valuation, or has the recent weakness simply adjusted expectations for future growth? Let’s explore further.

Most Popular Narrative: 6.6% Undervalued

According to the most popular narrative by user Tokyo, SAP is currently viewed as trading 6.6% below its fair value, based on a combination of growth outlook and profitability assumptions.

Over the next 5 years I calculate with (actual values from 04.05.25, price per share at 266 EUR): Revenue growth per annum: 9% (currently at 10.7%). The last 10 years' average was 6%, so I estimate an extra 3% since the transition to SaaS is mainly done and this provides potential for continuous price increases, which could be justified by further AI features. Profit margin: 18% (currently at 12.3%). The transition to cloud was very cost intensive, which kept margins during the last 3 years below 10%. Before that, SAP ranged between 15% and 20% profit margin. Even 20% could be reached in the long run.

Wondering what drives Tokyo’s positive outlook? This narrative points to a roadmap that features transformative growth rates and rising profitability, built on the idea that SAP’s transition has set the stage for further improvement. The focus is on whether ambitious financial goals and strategic changes could position SAP among industry leaders. Learn which numbers play a key role in this valuation perspective.

Result: Fair Value of €248.62 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks remain, including slower-than-expected cloud adoption or execution stumbles. These factors could temper growth expectations and shift the current narrative.

Find out about the key risks to this SAP narrative.

Another View: A Multiples-Based Reality Check

While the user narrative sees SAP as undervalued, a market-based approach presents a different perspective. Comparing SAP to other software companies on this key metric, the shares actually appear expensive. Could market optimism be overreaching?

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out SAP for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own SAP Narrative

If you see SAP differently or want to form your own perspective, take a few minutes to dive into the figures and shape your own viewpoint. You can do it your way.

A good starting point is our analysis highlighting 3 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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