As of May 27, 2025, American Software Inc's estimated intrinsic value ranges from $3.37 to $9.67 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $9.67 | -11.7% |
| Discounted Cash Flow (5Y) | $8.90 | -18.7% |
| Dividend Discount Model (Multi-Stage) | $5.17 | -52.8% |
| Dividend Discount Model (Stable) | $3.37 | -69.2% |
| Earnings Power Value | $5.74 | -47.6% |
Is American Software Inc (AMSWA) undervalued or overvalued?
With the current market price at $10.95, the stock appears to be significantly overvalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate American Software Inc's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.51 | 1.84 |
| Cost of equity | 10.8% | 15.2% |
| Cost of debt | 5.0% | 5.0% |
| Tax rate | 8.6% | 12.0% |
| Debt/Equity ratio | 1 | 1 |
| After-tax WACC | 7.7% | 9.8% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $9 | $246M | 80.9% |
| 10-Year Growth | $10 | $272M | 65.1% |
| 5-Year EBITDA | $10 | $281M | 83.3% |
| 10-Year EBITDA | $10 | $298M | 68.2% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $12M |
| Discount Rate (WACC) | 9.8% - 7.7% |
| Enterprise Value | $123M - $156M |
| Net Debt | $(54)M |
| Equity Value | $177M - $210M |
| Outstanding Shares | 34M |
| Fair Value | $5 - $6 |
| Selected Fair Value | $5.74 |
| Metric | Value |
|---|---|
| Market Capitalization | $369M |
| Enterprise Value | $315M |
| Trailing P/E | 34.53 |
| Forward P/E | 29.64 |
| Trailing EV/EBITDA | 19.30 |
| Current Dividend Yield | 402.04% |
| Dividend Growth Rate (5Y) | 1.72% |
| Debt-to-Equity Ratio | 1.11 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $2.90 |
| Discounted Cash Flow (5Y) | 25% | $2.23 |
| Dividend Discount Model (Multi-Stage) | 20% | $1.03 |
| Dividend Discount Model (Stable) | 15% | $0.51 |
| Earnings Power Value | 10% | $0.57 |
| Weighted Average | 100% | $7.24 |
Based on our comprehensive valuation analysis, American Software Inc's weighted average intrinsic value is $7.24, which is approximately 33.9% below the current market price of $10.95.
Key investment considerations:
Given these factors, we believe American Software Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.