Buffett Brain · Research note
Score updated 27 Oct 2026 · analysis from 2 Jun 2026
SAP· Technology
SAP
SAP is a sticky enterprise software toll booth at 73 percent gross margins, but the market is charging you nearly 24 times earnings for the privilege.
Buffett fit
Partial fit
Owner
56
Durability
55
Management
88
Price
42
Score updated 27 Oct 2026 · analysis from 2 Jun 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Technology stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If I owned all of SAP, I would be pleased with how the money is made. A 27.8 percent and that exceeds reported earnings, with an fcf to net income ratio of 1.11, tell me the profits are real and not accounting fiction.
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The durability score of 55 is fair. Once a giant company runs its ledgers on SAP, switching is painful and expensive, which is a real .
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Management earns an 88, the highest of the five marks, and it shows. The balance sheet carries zero and net cash, with net debt to EBITDA of negative 0.72, so they are not betting the company on leverage.
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Here is where I step back. The yield is just 4.52 percent and the is 23.6, which means I am paying a full price for a business growing earnings near 7.3 percent a year.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
7- 1Outstanding profitability with a 73.2 percent and a 27.8 percent , the signature of a business with real on renewals.
- 2A fortress balance sheet carrying zero and net cash, with net debt to EBITDA of negative 0.72.
- 3 that exceeds reported earnings, an fcf to net income ratio of 1.11, meaning the reported profits convert to actual cash.
- 4Disciplined management scoring 88, with a slightly shrinking share count at a CAGR of negative 0.29 percent rather than dilution.
Concerns
7- 1Valuation is rich: a of 23.6 and an yield of just 4.52 percent leave no for a business growing earnings near 7.3 percent.
- 2The EV to of 17.4 means the market has already priced in a successful cloud transition.
- 3The 5 year of only 9.0 percent is modest for a software franchise and trails the recent trailing figure.
- 4History shows fragility: a peak to trough earnings decline of 57 percent reminds me earnings are not bulletproof.
Price history
$239+64.8%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
SAP sells the back office plumbing that large companies run their finance, supply chain and HR on, and it is shifting that business from one time licenses to recurring cloud subscriptions. The economics are excellent once a customer is in, with a 73.2 percent and a 27.8 percent . Revenue has compounded at about 8.1 percent a year, which is steady rather than spectacular.
How this analysis has moved
The call has held across 6 reviews.
Sep 27, 2026 → Oct 26, 2026
What other investors would say
The same company, judged by three other documented playbooks.
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