GWRE – Market expectations are for Uniform ROA to improve, but management may have concerns about cloud offerings, cloud migration, and profitability

May 20, 2022

  • Guidewire Software (GWRE) currently trades at a premium relative to Uniform assets, with a 4.9x Uniform P/B (V/A’).
  • At these levels, markets are pricing in expectations for Uniform ROA to improve to 20%, accompanied by 7% Uniform asset growth.
  • Meanwhile, analysts expect Uniform ROA to fade to 3% in 2023, accompanied by 9% Uniform asset growth.
  • If sustained going forward, these levels would imply a stock price closer to $17, representing significant potential equity downside for the firm.
  • Moreover, the firm’s most recent earnings call suggests management may have concerns about cloud offerings, cloud migration, and profitability.

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