Subject: SAP SE
SAP SE (SAP.DE) at €168.68, down 13% today on an earnings release that apparently was not well received. The giant of the European software space.
Also listed in the US as SAP, $202.88 in pre-market as I type, down 14.1%.

Interesting firm, I wish I knew it more deeply.

As part of a long term ongoing switch from license sales to recurring revenue, net earnings have plateaued for a while. The same sort of drawn out short-term-pain-long-term-gain effect that Adobe went through.

I hear their cloud stuff is doing very well indeed.

You can see that sales growth rate has held up well, but net earnings haven't--falling net margins, which may ultimately be transient. "Analyst opinion" is that this is coming to and end, and even some of the more conservative analysts are expecting double digit earnings increases for at least the next 5 years. Several forecasts are around 15-16%/year, cloud division maybe 20%/year for a while. Value Line mentions EPS growth of 26.5%/year for the 3-5 year horizon on sales growth of 9%/year, so a big rebound in net margins.

Bad news? Alas sales growth is very much better at top line than at the per-share level - share counts have risen a lot over time, e.g. up about 5.5%/year in the last decade. And I think (?) that is due overwhelmingly to a whole lot of not-very-European share- and option-based comp, not acquisitions. Ick.

Still, one might see €10 in on-trend EPS after not that long. 15 year median multiple around 25x range, higher during earnings dips, because their revenue is considered so reliable.

Indicated dividend is about 1.20% for those who care. I think I heard a rumour that they were going to cut their payout ratio and put more capital into growth initiatives. But as mentioned, I don't really know them deeply.

If researching, be sure to check whether you're looking at IFRS bookkeeping or not, there are figures out there under different standards which are not always commensurable, like the euro and USD figures.

Jim
(no position, yet anyway)