Is Bentley Systems (BSY) Pricing Reflect Recent Volatility And Infrastructure Software Growth Prospects

• This article walks through the numbers so you can consider whether Bentley Systems' current share price reflects what the business is worth.
• At a last close of US$34.10, the stock has returned 2.8% over the past week. The 30 day, year to date, 1 year and 3 year returns of 12.9%, 10.6%, 27.4% and 15.4% respectively indicate that recent trading has not moved in a straight line.
• Recent coverage has focused on Bentley Systems' role in infrastructure and engineering software, including ongoing interest in how its tools are used across large scale projects and digital twin solutions. That broader context has kept attention on how the business model and customer base might relate to the share price moves investors have been seeing.
• Bentley Systems currently has a valuation score of 3/6, reflecting the checks where it screens as undervalued and those where it does not. Next, we will look at how different valuation methods line up on the stock before finishing with a simple framework that can help you interpret those methods more clearly.

Find out why Bentley Systems's -27.4% return over the last year is lagging behind its peers.

Approach 1: Bentley Systems Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business could be worth today by projecting future cash flows and then discounting them back to a present value.

For Bentley Systems, the model used is a 2 Stage Free Cash Flow to Equity approach, based on last twelve month free cash flow of about $457.4 million. Analysts provide specific forecasts for the next few years, with Simply Wall St extending these into longer term projections. By 2035, free cash flow is projected at $889.6 million, with each year between now and then discounted back to reflect the time value of money.

Adding these discounted cash flows together gives an estimated intrinsic value of $38.26 per share, compared with the recent share price of $34.10. That implies the shares trade at about a 10.9% discount to this DCF estimate, which indicates that the stock appears modestly undervalued on this model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Bentley Systems is undervalued by 10.9%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Bentley Systems.

Approach 2: Bentley Systems Price vs Earnings

For profitable companies, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings, because it links the share price directly to current profitability.

What counts as a “normal” P/E depends on how quickly earnings are expected to grow and how risky those earnings are. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk tends to support a lower P/E.

Bentley Systems currently trades on a P/E of 39.8x. That is above the broader Software industry average of about 26.4x, but below the peer group average of around 67.5x. Simply Wall St also calculates a “Fair Ratio” of 28.5x, which is the P/E it would expect for Bentley Systems after taking into account factors such as earnings growth, industry, profit margins, market cap and specific risks.

This Fair Ratio is designed to be more tailored than a simple comparison with peers or the sector, because it adjusts for the company’s own characteristics rather than assuming all software names should trade on similar multiples. Comparing the current 39.8x P/E with the Fair Ratio of 28.5x indicates that the shares trade on a richer multiple than this framework would imply.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Bentley Systems Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St you can use Narratives, which let you attach a clear story about Bentley Systems to the numbers you care about by linking your view of its future revenue, earnings and margins to a forecast, a Fair Value, and then a simple comparison with today’s price. All of this is available inside an easy tool on the Community page that millions of investors use. Narratives refresh as new news or earnings arrive. For example, one Bentley Systems Narrative might lean closer to the lower US$42 fair value while another leans toward the higher US$65 fair value, giving you a quick sense of how different views on the same company can lead to very different conclusions about whether the current price looks high, low or roughly in line with your own expectations.

Do you think there's more to the story for Bentley Systems? Head over to our Community to see what others are saying!

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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