Brief valuation of Systems, Applications & Products (SAP) corporation


Brief valuation of Systems, Applications & Products (SAP) corporation


Yibin Liu, Andrew Gleeson, Ciaran Dowling,Julian Rene Graef


Global-journal-of-Economics-and-Business-Administration

SAP is one of the largest players in the commercial software sector. Following our analysis of SAP’s history and capital structure, it is evident that the company has been able to sustain a stable growth for the past 15 years, whilst also maintaining a stable dividend payout. Barring 2015, SAP’s WACC has fallen year on year over the observed period, maximising shareholder value and equity prices. Its conservative financing policy, with a greater emphasis on equity financing than debt may on the one side foreclose potential growth acceleration, yet also indicates a long-sighted managerial conservatism that is focused on long-term value creation rather than short-term growth. One danger of conservative policies is the potential stalling of further growth. However, new partnerships such as the newly announced enlargement of SAP’s cooperation with Microsoft in the sphere of cloud services point in the right direction towards further growth in a highly saturated sector.


Keywords: Valuation of Systems, Applications & Products, SAP

Free Full-text PDF


How to cite this article:
Yibin Liu, Andrew Gleeson, Ciaran Dowling,Julian Rene Graef. Brief valuation of Systems, Applications & Products (SAP) corporation. Global journal of Economics and Business Administration, 2018, 3: 7. DOI: 10.28933/gjeba-2018-03-0801


References:

1 Bloomberg L.P. (2017) . SAP Relative Valuations 14/11/2017. Retrieved November 14, 2017 from Bloomberg Terminal.
2 Forbes. (2017). The World’s Biggest Public Companies: 2017 Ranking. Retrieved from https://www.forbes.com/global2000/list/#header:position_industry:Software%20%26%20Programming
3 Goedhart, M., Koller, T. & Wessels, D. (2005). The right role for multiples in valuation. Mc Kinsey & Company Strategy & Corporate Finance.
4 Retrieved from https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/th e-right-role-for-multiples-in-valuation
5 Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American economic review, 48(3), 261-297.
6 Ross, S. A. (1977). The determination of financial structure: the incentive-signalling approach. The bell journal of economics, 23-40.
7 N.A. (2017, November 15). SAP Stock report. Retrieved from Morningstar Investment Research Database.
8 Opler, T. C., Saron, M., & Titman, S. (1997). Designing capital structure to create shareholder value. Journal
9 of Applied Corporate Finance, 10(1), 21-32.
10 SAP. (2016). SAP Annual Report 2016.
11 Retrieved from: https://www.sap.com/docs/download/investors/2016/sap-2016-annual-report-form-20f.pdf
12 Ycharts (2017). Dividends comparison with other major companies in industry 10/11/17.
13 Retrieved from https://ycharts.com/