Sage Has Reached the Inflection Point in Its Cloud Transformation; Shares Fairly Valued

We are initiating coverage on the Sage Group with a narrow moat rating and GBX 810 fair value estimate. Our fair value estimate is equivalent to a P/E ratio of 29 times, based on fiscal 2023 estimates, which is moderately above its historical average of around 25 times. We think the implied optimism is warranted given we expect profit growth to accelerate going forward now that Sage has reached the inflection point in its transition to the cloud. Our estimates are broadly in line with consensus. Consequently, we see the stock as fairly valued at current levels.