- Wondering whether Globant at US$44.71 is priced as a bargain or a value trap? This article walks you through what the current market price might be implying.
- The share price has had a tough run, with a 0.5% decline over 7 days, 2.4% decline over 30 days, 29.1% decline year to date and 65.8% decline over the last year. This will shape how you think about both potential growth and risk.
- These moves sit against a backdrop of ongoing interest in software and IT services companies, where many investors are reassessing what they are willing to pay for growth and recurring revenue models. Sector wide shifts in sentiment, interest rates and risk appetite can all influence how a company like Globant is valued at any given point.
- Globant currently has a valuation score of 4/6, which suggests some measures flag the shares as potentially undervalued while others are more cautious. Next you will see how different valuation approaches treat the stock and, by the end of the article, a broader way to think about what that valuation really means.
Find out why Globant's -65.8% return over the last year is lagging behind its peers.
Approach 1: Globant Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model takes projections of the cash a business could generate in the future and discounts those cash flows back to today using a required return, to arrive at an estimate of what the whole company might be worth now.
For Globant, the latest twelve month Free Cash Flow is about $184.9 million. Analyst and extrapolated estimates used in this 2 Stage Free Cash Flow to Equity model include projected Free Cash Flow of $309 million in 2030, with interim years such as 2026 to 2029 ranging from $206.2 million to $304 million based on the data provided. These forecasts are converted into today’s dollars using discount factors supplied in the model.
On this basis, the DCF model points to an estimated intrinsic value of $98.09 per share, compared with a current share price of $44.71. That gap translates into an implied 54.4% discount, which signals that, under these assumptions and cash flow projections, Globant screens as materially undervalued on a DCF basis.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Globant is undervalued by 54.4%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.
Approach 2: Globant Price vs Earnings
For profitable companies, the P/E ratio is a useful way to see how much you are paying for each dollar of earnings. It helps you compare what the market is willing to pay for one business versus another that is also generating profits.
What counts as a “normal” P/E depends a lot on what investors expect for future growth and how risky they think those earnings are. Higher expected growth or lower perceived risk can support a higher P/E, while more uncertainty or weaker growth expectations usually point to a lower multiple.
Globant currently trades on a P/E of 18.76x. That sits close to the IT industry average P/E of 19.37x and above the peer group average of 11.21x. Simply Wall St’s Fair Ratio for Globant is 30.26x. This is a proprietary estimate of the P/E that might be consistent with the company’s earnings growth profile, profitability, industry, market cap and specific risks.
The Fair Ratio can be more informative than simple peer or industry comparisons because it adjusts for factors like growth, margins and size rather than assuming every IT stock should trade on the same multiple. Comparing 30.26x with the current 18.76x suggests Globant’s shares screen as undervalued on this P/E based view.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Globant Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced as a simple tool that lets you attach a clear story to your numbers by linking your view of Globant’s future revenues, earnings and margins to a forecast and then to a Fair Value that can be compared with today’s price.
On Simply Wall St’s Community page, Narratives are available as an easy input or adjust exercise. You can see how a bullish view that points to a Fair Value around US$121.63, or even toward the high analyst cohort around US$180.01, leads to one set of decisions when compared to the current share price. In contrast, a more cautious view anchored nearer the US$50 bearish Fair Value or the US$73.36 updated estimate leads to a very different conclusion about risk and return.
Because each Narrative is refreshed when new information such as earnings, guidance, price targets or news comes in, you are not locked into a static model. You can quickly see how the story and Fair Value move as Globant’s AI pod model, bookings and guidance are updated, helping you decide whether the current market price is above or below the story you believe is most reasonable.
Do you think there's more to the story for Globant? 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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