XTRA:SOW

Stock Analysis Report

Executive Summary

Software Aktiengesellschaft provides software development, licensing, and maintenance; and information (IT) services worldwide.

Rewards

Trading at 25.4% below its fair value

Earnings have grown 7% per year over the past 5 years

Risk Analysis

Earnings are forecast to decline by an average of -2.3% per year for the next 3 years

Unstable dividend track record



Snowflake Analysis

Flawless balance sheet and undervalued.


Similar Companies

Share Price & News

How has Software's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: SOW has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

3.3%

SOW

1.5%

DE Software

0.7%

DE Market


1 Year Return

1.0%

SOW

37.4%

DE Software

15.6%

DE Market

Return vs Industry: SOW underperformed the German Software industry which returned 39.3% over the past year.

Return vs Market: SOW underperformed the German Market which returned 17.1% over the past year.


Shareholder returns

SOWIndustryMarket
7 Day3.3%1.5%0.7%
30 Day7.3%4.4%1.7%
90 Day16.7%6.9%6.3%
1 Year3.4%1.0%39.2%37.4%19.2%15.6%
3 Yearn/a63.2%56.6%18.3%7.9%
5 Yearn/a141.0%123.8%26.8%9.4%

Price Volatility Vs. Market

How volatile is Software's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Software undervalued compared to its fair value and its price relative to the market?

23.0%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: SOW (€32.19) is trading below our estimate of fair value (€43.15)

Significantly Below Fair Value: SOW is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: SOW is good value based on its PE Ratio (14.2x) compared to the Software industry average (41.3x).

PE vs Market: SOW is good value based on its PE Ratio (14.2x) compared to the German market (20.6x).


Price to Earnings Growth Ratio

PEG Ratio: SOW's earnings are forecast to decline next year, so we can't calculate its PEG ratio.


Price to Book Ratio

PB vs Industry: SOW is good value based on its PB Ratio (1.8x) compared to the DE Software industry average (3.1x).


Next Steps

Future Growth

How is Software forecast to perform in the next 1 to 3 years based on estimates from 16 analysts?

-2.8%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: SOW's earnings are forecast to decline over the next 3 years (-2.3% per year).

Earnings vs Market: SOW's earnings are forecast to decline over the next 3 years (-2.3% per year).

High Growth Earnings: SOW's earnings are forecast to decline over the next 3 years.

Revenue vs Market: SOW's revenue (3.4% per year) is forecast to grow slower than the German market (4.8% per year).

High Growth Revenue: SOW's revenue (3.4% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: SOW's Return on Equity is forecast to be low in 3 years time (10.7%).


Next Steps

Past Performance

How has Software performed over the past 5 years?

7.0%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: SOW has high quality earnings.

Growing Profit Margin: SOW's current net profit margins (18.7%) are higher than last year (17.5%).


Past Earnings Growth Analysis

Earnings Trend: SOW's earnings have grown by 7% per year over the past 5 years.

Accelerating Growth: SOW's earnings growth over the past year (10.7%) exceeds its 5-year average (7% per year).

Earnings vs Industry: SOW earnings growth over the past year (10.7%) underperformed the Software industry 14.6%.


Return on Equity

High ROE: SOW's Return on Equity (12.5%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Software's financial position?


Financial Position Analysis

Short Term Liabilities: SOW's short term assets (€763.0M) exceed its short term liabilities (€486.3M).

Long Term Liabilities: SOW's short term assets (€763.0M) exceed its long term liabilities (€274.2M).


Debt to Equity History and Analysis

Debt Level: SOW's debt to equity ratio (22.4%) is considered satisfactory.

Reducing Debt: SOW's debt to equity ratio has reduced from 44.9% to 22.4% over the past 5 years.

Debt Coverage: SOW's debt is well covered by operating cash flow (61.7%).

Interest Coverage: SOW earns more interest than it pays, so coverage of interest payments is not a concern.


Balance Sheet

Inventory Level: SOW has a low level of unsold assets or inventory.

Debt Coverage by Assets: SOW's debt is covered by short term assets (assets are 2.5x debt).


Next Steps

Dividend

What is Software's current dividend yield, its reliability and sustainability?

2.14%

Current Dividend Yield


Dividend Yield vs Market

company2.1%marketbottom25%1.4%markettop25%3.5%industryaverage1.2%forecastin3Years2.1%

Current dividend yield vs market & industry

Notable Dividend: SOW's dividend (2.21%) is higher than the bottom 25% of dividend payers in the German market (1.38%).

High Dividend: SOW's dividend (2.21%) is low compared to the top 25% of dividend payers in the German market (3.53%).


Stability and Growth of Payments

Stable Dividend: Whilst dividend payments have been stable, SOW has been paying a dividend for less than 10 years.

Growing Dividend: SOW's dividend payments have increased, but the company has only paid a dividend for 2 years.


Current Payout to Shareholders

Dividend Coverage: With its reasonably low payout ratio (31.3%), SOW's dividend payments are well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: SOW's dividends in 3 years are forecast to be well covered by earnings (32% payout ratio).


Next Steps

Management

What is the CEO of Software's salary, the management and board of directors tenure and is there insider trading?

1.2yrs

Average management tenure


CEO

Sanjay Brahmawar 0

1.4yrs

Tenure

€2,697,563

Compensation

Mr. Sanjay Brahmawar has been Chief Executive Officer and Chairman of the Management Board of Software AG, Inc. and Software Aktiengesellschaft since August 1, 2018. Mr. Brahmawar serves as General Manager ...


CEO Compensation Analysis

Compensation vs Market: Sanjay's total compensation ($USD3.00M) is above average for companies of similar size in the German market ($USD2.07M).

Compensation vs Earnings: Insufficient data to compare Sanjay's compensation with company performance.


Management Age and Tenure

1.2yrs

Average Tenure

54yo

Average Age

Experienced Management: SOW's management team is not considered experienced ( 1.2 years average tenure), which suggests a new team.


Board Age and Tenure

4.7yrs

Average Tenure

55yo

Average Age

Experienced Board: SOW's board of directors are considered experienced (4.7 years average tenure).


Insider Trading

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • Arnd Zinnhardt (57yo)

    CFO & Member of the Management Board

    • Tenure: 18yrs
    • Compensation: €3.66m
  • Otmar Winzig

    Senior VP & Head of Investor Relations

    • Bernd Gross

      Chief Technology Officer

      • Tenure: 1yrs
    • John Schweitzer (51yo)

      Chief Revenue Officer & Member of the Management Board

      • Tenure: 1.2yrs
      • Compensation: €1.09m
    • Byung-Hun Park

      Senior Vice President of Corporate Communications

      • Stefan Sigg (54yo)

        Chief Product Officer & Member of Management Board

        • Tenure: 2.8yrs
        • Compensation: €1.88m
      • Sanjay Brahmawar

        Chairman of the Management Board & CEO

        • Tenure: 1.4yrs
        • Compensation: €2.70m
      • Benno Quade

        Senior Vice President of Global Legal

        • Paz Macdonald

          Chief Marketing Officer

          • Tenure: 1yrs
        • Elke Frank

          Chief Human Resources Officer & Member of Executive Board

          • Tenure: 0.4yrs

        Board Members

        • Andreas Bereczky (66yo)

          Chairman of Supervisory Board

          • Tenure: 10.8yrs
          • Compensation: €185.20k
        • Markus Ziener (53yo)

          Member of Supervisory Board

          • Tenure: 4.7yrs
          • Compensation: €74.00k
        • Alf Wulf (57yo)

          Member of the Supervisory Board

          • Tenure: 12.7yrs
          • Compensation: €86.00k
        • Eun-Kyung Park (41yo)

          Member of Supervisory Board

          • Tenure: 4.7yrs
          • Compensation: €78.00k
        • Guido Falkenberg (52yo)

          Deputy Chairman of Supervisory Board

          • Tenure: 4.7yrs
          • Compensation: €119.00k
        • Christian Zimmermann (57yo)

          Member of Supervisory Board

          • Tenure: 4.7yrs
          • Compensation: €72.00k

        Company Information

        Software Aktiengesellschaft's company bio, employee growth, exchange listings and data sources


        Key Information

        • Name: Software Aktiengesellschaft
        • Ticker: SOW
        • Exchange: XTRA
        • Founded: 1969
        • Industry: Systems Software
        • Sector: Software
        • Market Cap: €2.460b
        • Shares outstanding: 73.98m
        • Website: https://www.softwareag.com

        Number of Employees


        Location

        • Software Aktiengesellschaft
        • Uhlandstrasse 12
        • Darmstadt
        • Hessen
        • 64297
        • Germany

        Listings

        TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
        STWR.YOTCPK (Pink Sheets LLC)SPONSORED ADRUSUSDNov 2005
        SWDA.FOTCPK (Pink Sheets LLC)YesRegistered SharesUSUSDOct 2017
        SOWDB (Deutsche Boerse AG)YesRegistered SharesDEEUROct 2017
        SOWDBATS-CHIXE (BATS 'Chi-X Europe')YesRegistered SharesGBEUROct 2017
        SOWWBAG (Wiener Boerse AG)YesRegistered SharesATEUROct 2017
        0RULLSE (London Stock Exchange)YesRegistered SharesGBEUROct 2017
        SOWSWX (SIX Swiss Exchange)YesRegistered SharesCHCHFOct 2017
        SOWXTRA (XETRA Trading Platform)YesRegistered SharesDEEUROct 2017
        SOW-UETLX (Eurotlx)YesRegistered SharesITEUROct 2017

        Biography

        Software Aktiengesellschaft provides software development, licensing, and maintenance; and information (IT) services worldwide. It operates through three segments: Digital Business Platform, Adabas & Natural, and Consulting. The company offers Adabas & Natural, a transaction processing platform that enables digital enterprises to leverage core systems in various ways; Alfabet for use in IT planning and portfolio management, as well as enterprise architecture management; Apama, a platform for streaming analytics and intelligent automated actions on fast-moving big data; and Architecture for Integrated Information Systems, a platform that makes processes transparent, controlled, manageable, and agile. It also provides cloud-based platform-as-a-service suite, such as CONNX that provides secure, and real-time read/write SQL data access and integration; Cumulocity, which offers Internet of Things (IoT) connectivity for networked digital devices and sensors through a cloud-hosted IoT device management and application enablement platform; Terracotta, a platform that enables digital enterprises to access and store large volumes of data in-memory, as well as enhance system performance; webMethods, which enables customers to integrate systems, partners, data, devices, and software as a service applications; and Zementis that enables predictive analytics with artificial intelligence and machine learning capabilities. Further, the company provides digital transformation consulting, platform consulting, performance ready content, platform rapid innovation methodology, training, and support services. It offers its products and services for customers in banking and securities, communication and media, education, energy and natural resources, manufacturing, retail, transportation, healthcare, insurance, utilities, and government sectors. Software Aktiengesellschaft was founded in 1969 and is headquartered in Darmstadt, Germany. 


        Company Analysis and Financial Data Status

        All financial data provided by Standard & Poor's Capital IQ.
        DataLast Updated (UTC time)
        Company Analysis2020/01/21 22:22
        End of Day Share Price2020/01/21 00:00
        Earnings2019/09/30
        Annual Earnings2018/12/31


        Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.