- Wondering whether Blackbaud at around US$37.54 is a bargain or a value trap? This breakdown will help you size up what the current share price really reflects.
- The stock has been broadly flat over the last month at around 0.0%. However, that sits against a much tougher backdrop with a 36.9% decline year to date and a 38.9% decline over the past year.
- Those longer term returns mean many holders are sitting on losses, which often pushes valuation questions to the front of investors' minds. Fresh coverage and renewed interest in the name are keeping attention on whether the market has become too pessimistic or is simply being cautious.
- On Simply Wall St's 6 point valuation checklist, Blackbaud scores a 5. The rest of this article will walk through the main valuation methods behind that score and finish with a broader way to think about what the numbers are really saying.
Find out why Blackbaud's -38.9% return over the last year is lagging behind its peers.
Approach 1: Blackbaud Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model projects a company’s future cash flows and then discounts them back to today’s value to estimate what the entire business might be worth right now.
For Blackbaud, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections in $. The latest twelve month Free Cash Flow is around $251.3 million, and analysts plus model estimates project Free Cash Flow of $330.0 million by 2030. Between 2026 and 2035, Simply Wall St combines analyst forecasts for the earlier years with extrapolated figures for the later years to extend the cash flow path.
On this basis, the DCF model arrives at an estimated intrinsic value of about $92.31 per share. Compared with the recent share price of roughly $37.54, the DCF output suggests the stock is 59.3% undervalued according to these assumptions and projections.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Blackbaud is undervalued by 59.3%. Track this in your watchlist or portfolio, or discover 52 more high quality undervalued stocks.
Approach 2: Blackbaud Price vs Earnings
For profitable companies, the P/E ratio is a useful way to connect what you pay for each share with the earnings that business is currently generating. It gives you a quick sense of how many dollars of price you are paying for each dollar of earnings.
What counts as a “normal” or “fair” P/E depends on what investors expect for future growth and how risky they think those earnings are. Higher growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually points to a lower one.
Blackbaud currently trades on a P/E of about 12.0x. That is well below both the Software industry average P/E of 28.76x and a peer group average of 63.40x. Simply Wall St’s Fair Ratio for Blackbaud is 21.15x. This is the P/E level it estimates would be appropriate given factors such as earnings growth profile, industry, profit margins, market cap and specific risks.
This Fair Ratio is more tailored than a simple comparison with peers or the broad Software industry, because it adjusts for company specific characteristics instead of assuming one size fits all. Compared with the current 12.0x P/E, the Fair Ratio of 21.15x points to the shares trading below that tailored benchmark.
Result: UNDERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 18 top founder-led companies.
Upgrade Your Decision Making: Choose your Blackbaud Narrative
Earlier it was mentioned that there is an even better way to think about valuation. On Simply Wall St this takes the form of Narratives, where you set out your own story for Blackbaud, link it to a forecast for future revenue, earnings and margins, translate that into a Fair Value, and then compare that Fair Value with the current price to decide whether the shares look attractive or not. All of this is done within an easy to use Community tool that updates automatically as fresh information such as news or earnings arrives. For example, one investor might build a more optimistic Blackbaud Narrative that leans closer to a Fair Value near US$74.0, while another might prefer a more cautious Narrative anchored nearer US$50.0. Both views sit side by side for you to review and adapt to your own assumptions.
Do you think there's more to the story for Blackbaud? 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com