I believe that Guidewire Software is very overvalued at 10x-12x sales. Using the valuation of peers of 3.9x sales, I would see a reduction of 40%-50% in the share price justifiable. In my opinion, when the market understands the revenue growth reduction, the total valuation will decline. Additionally, I could read that there is risk of restatement of the company’s 2017 and 2018 sales. A few short sellers are targeting the company, which makes sense. In the near future, I would expect that more short sellers would review the company’s financial figures.
California-based and founded in 2001, Guidewire Software, Inc. offers software, a partner ecosystem, and other services for the property and casualty insurance industry.
The company’s platform includes both a cloud system and a data platform with visualization and machine learning capabilities. The number of applications offered is also significant.
Guidewire Software appears to have a large network of consultants and partners. Some of the most relevant IT consulting companies have trained personnel. In my view, it is one of the most interesting features of Guidewire. Notice that partners and consultants sell the platform.
Gartner reports that the company’s software InsuranceSuite is among the best in the industry. For the readers, who don’t know, Gartner is considered one of the most prestigious research and advisory companies. While I have some doubts about the current valuation of the company, I do believe that Guidewire appears to offer terrific services.
Why Does Guidewire Need That Amount Of Cash?
I do appreciate that Guidewire Software, Inc. reports a solid balance sheet. The total amount of assets is 3.5x the total amount of liabilities.
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Disclosure: We hold no position in Guidewire Software either long or short, and we have not been compensated for the research.