Sage Earnings: Shares Rise 13% on Strong Free Cash Flow and Share Buyback; Raising Fair Value 9%

Narrow-moat Sage Group reported fiscal 2023 results and its initial 2024 outlook that were largely in line with company-compiled consensus and our estimates. Somewhat surprisingly, the stock closed up over 13%. We think this was driven by Sage’s strong free cash flow growth and announcement of a new share buyback. We’re raising our fair value estimate to GBX 880 from GBX 810 due to an improvement in our expectations for the pace of margin progress. At current levels, the shares look overvalued.