Guidewire Software Inc scores 57 for management and 65 for moat. The management score rests on a return on invested capital of 6.7% and a gross margin of 64.2% — figures that describe returns closer to the cost of the capital behind them. Debt sits at 0.59x equity. A solid moat alongside mixed management is a combination worth understanding before the price matters at all.
The valuation runs on assumptions chosen to understate rather than flatter. Growth is modelled at 14.7% a year, below the 15.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 29.4x. That produces an intrinsic value of $46.95, a 10-CAP price of $35.49 and a payback time price of $55.26, with the value zone set at the highest of the three, $55.26. Today's price of $155.32 is 181% above it.
The price is above the value zone and the business scores 65 for moat and 57 for management. Neither test argues for paying up here.
| Price | $155.32 |
| Market cap | $12.9B |
| P/E ratio | 94.7x |
| Return on invested capital | 6.7% |
| Gross margin | 64.2% |
| Debt to equity | 0.59x |
| Free cash flow yield | 3.0% |
| Growth rate used | 14.7% |
| Growth rate measured | 15.0% |
| Exit multiple assumed | 29.4x |
| Company | Moat | Buy price |
| Tyler Technologies (TYL) | 91 | $271.27 |
| Manhattan Associates Inc (MANH) | 90 | $97.93 |
| Fair Isaac (FICO) | 80 | $528.01 |
| HubSpot Inc. (HUBS) | 98 | $247.62 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Guidewire Software Inc rather than accepting ours.