Equity valuation

: the Sage group

Abstract

This dissertation aims to estimate the share price of The Sage Group (LON:SGE), a prominent player operating in the enterprise resource planning software (ERP) market for small and medium-sized businesses, as of November 27th 2024. The objective of the valuation is anchored on ultimately providing a “buy”, “hold”, or “sell” recommendation after a thorough analysis of macroeconomic factors, market conditions, competitive dynamics, and company-specific data. The target price is derived from four valuation approaches: Discounted Cash Flow (DCF), forward P/E multiple, forward EV/S multiple, and forward EV/EBITDA multiple, with the DCF model constituting the primary driver (80% weighting) and subject to sensitivity analysis. The DCF valuation yields a target price of GBX 1,324, with a sensitivity range between GBX 1,039.61 and GBX 1,817.53, reflecting potential variations of -22% to +37% under fluctuations of +/- 1 percentage point in WACC and +/- 0.5 percentage points in the terminal growth rate. The relative valuation methods yield a lower target price: GBX 746 from the forward P/E ratio, GBX 1,132 from the forward EV/S, and GBX 926 from the forward EV/EBITDA multiple. The resulting Sage target price per share amounts to GBG 1,246, representing a slight downside of -3% relative to the November 27th 2024 trading price of GBX 1,303 and a -4% downside compared to the GBX 1,290 target from HSBC. Therefore, considering all factors, this dissertation issues a “hold” recommendation.

Date of Award	6 May 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	José Carlos Tudela Martins (Supervisor)