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SAP (XTRA:SAP) has been back in focus after announcing a large AI-supported healthcare platform partnership with Fresenius, along with new AI and cloud initiatives that are drawing more attention to its broader enterprise software franchise.
See our latest analysis for SAP.
Despite a stream of AI and cloud partnerships, including Syngenta, Fresenius and new integrations like LLumin’s CMMS+ on SAP platforms, the share price has recently cooled, with a 90 day share price return of an 18.65% decline and a 1 year total shareholder return of a 27% decline, set against much stronger 3 and 5 year total shareholder returns.
If SAP’s AI push has you thinking about where else software and automation could reshape industries, it might be a good time to scan high growth tech and AI stocks for other candidates catching market attention.
With SAP’s shares down over the past year, yet flagged by some analysts as already pricing in its cloud and AI trajectory, the key question for you is simple: is there still a buying opportunity here, or has the market already priced in future growth?
According to the most followed narrative, SAP’s fair value of €162.73 sits below the last close of €189.84, which raises questions about how much optimism is already in the price.
SAP is a good company with a wide moat, very high margins and solid growth overall. However, the fact that the ROIC 5 Year Average is less than its estimated cost of capital should be something to watch out for because it could mean that the company is destroying value and, given its revenue growth, at an accelerated pace.
If you care about where this valuation comes from, the real story sits in the blend of cash flow forecasts, earnings growth, and how much confidence the author has in SAP’s moat and pricing power. The tension between strong projected margins and a cost of capital hurdle is what shapes that €162.73 figure.
Result: Fair Value of €162.73 (OVERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, this view could shift quickly if SAP’s AI and cloud initiatives alter profit expectations, or if its cost of capital assumptions change with new market data.
Find out about the key risks to this SAP narrative.
While the user narrative lands on a fair value of €162.73 and calls SAP overvalued, our DCF model suggests something very different. Using future cash flow estimates, it points to a fair value of €370.37, which would make the current €189.84 price look materially undervalued.
That gap highlights how sensitive valuation is to growth, margin and discount rate assumptions. If the cash flows underpinning our DCF model hold up, today’s price could be closer to a discount than a premium. Which set of assumptions do you find more convincing?
Look into how the SWS DCF model arrives at its fair value.
SAP Discounted Cash Flow as at Jan 2026
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 878 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.
If you feel the current narratives do not quite fit your view, you can review the same numbers, test your own assumptions and build a personalised story in just a few minutes, then Do it your way.
A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding SAP.
If SAP has sharpened your thinking, do not stop here. Broaden your watchlist and give yourself more options before your next investing decision.
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.
Companies discussed in this article include SAP.DE.
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