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How Does SAP Stack up in the Global Software Space?

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Aug. 3 2016, Updated 11:04 a.m. ET

SAP’s scale in the software space

Previously in this series, we discussed factors such as SAP’s (SAP) growth in the cloud space, which has facilitated the company’s improved performance. In its previous fiscal quarter, SAP not only reported growth in cloud subscriptions but also in software licenses. This boosted not only company’s revenue growth but also led to an expansion in margins.

Now, let’s look at where the company’s value proposition stands in the global software space, starting with SAP’s size.

As of July 28, 2016, Microsoft (MSFT) was the largest player by market capitalization in the software space. MSFT was followed by Oracle (ORCL), IBM (IBM), SAP, and Salesforce (CRM).
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SAP’s enterprise value multiple and dividend yield

SAP was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~12.71x on July 28, 2016. This was higher than Microsoft’s ~9.8x, IBM’s ~8.9x, and Oracle’s 8.7x.

SAP’s forward annual dividend yield was ~1.51% as of July 28, 2016. Microsoft’s, Oracle’s, and IBM’s forward annual dividend yields were ~2.6%, ~1.5% and ~3.5%, respectively, as of July 28. Salesforce doesn’t pay a dividend.

Investors who want to gain exposure to Citrix can consider investing in the SPDR S&P 500 ETF (SPY). SPY invests ~0.07% of its holdings in Citrix. It also has ~8% exposure to the application software sector.

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