“I am pleased that our operational excellence measures are already showing effect. Our non-IFRS operating profit and margin performance is remarkable considering the margin headwinds from our latest acquisition and the recent short-term trade-related uncertainty in Asia that impacted our software revenue performance in the region. With continued strong customer demand and our tight focus on profitability, we remain as confident in our 2019 outlook as we are in our mid-term ambition.”Luka Mucic, SAP CFO
Simply Wall Street, a new platform for tracking stocks and visualizing stock data, took a look at the potential of SAP SE Stock holistically in its recent article on Yahoo Finance. SAP is a sound investment case having excellent fundamentals in more than one area and remains to be a financially sound company with an impressive track record of dividend payments and an excellent future outlook.
Here are some key takeaways from the analysis:
SAP has high growth potential with an adequate balance sheet
SAP’s expected earnings growth is at 28%, underlying the notable 20% return on equity over the next few years leading up to 2022. This is a sweet spot for investors. The German software giant’s debt-to-equity ratio stands at 5.3%. SAP’s acceptable debt level indicates a good balance between taking advantage of low-cost funding through debt financing but having enough financial flexibility and headroom to grow debt in the future. Also, SAP has produced operating cash levels of 2.75x total debt over the past year. This means that the management was able to generate enough cash to cover a sufficient portion of borrowings.
SAP is a dividend company
SAP, as a dividend company, has a substantial net income to cover its dividend payout. Over the past decade, it has been consistently growing, giving much favor to the income investors.
Simply Wall Street also identified three fundamental aspects to examine with SAP SE stock investment.
1. Historical Performance. Make an in-depth analysis of SAP’s past track record.
2. Valuation: Know SAP’s worth today and assess if the stock is undervalued, even when its growth outlook is factored into its intrinsic value.
3. Other Attractive Alternatives: Are there other well-rounded stocks you could be holding instead of SAP?
In SAP’s Quarterly Statement Q2 2019, double-digit growth was seen across the board. The Cloud revenue was up by 40% while both the Cloud & Software revenue and total revenue was up by 11%. All of these were achieved despite the recent short-term trade-related uncertainty in Asia that impacted its software revenue performance in the region. Earlier this year, SAP CEO Bill McDermott has announced that SAP’s value will double by 2023 and China was identified as the fastest-growing market.