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If you are wondering whether Dassault Systèmes at around €19.73 is starting to look interesting, the key question is how that price stacks up against what the business might be worth.
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The stock has inched up 1.6% over the past week and 1.8% over the past month, yet remains down 15.7% year to date and has declined 41.2% over the last year. This can change how investors think about both risk and opportunity.
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Recent coverage of Dassault Systèmes has focused on providing ongoing context for long term shareholders and potential new investors, rather than on short term trading catalysts. That evergreen focus makes it a good moment to step back and assess whether the current share price lines up with fundamentals.
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Simply Wall St currently gives Dassault Systèmes a valuation score of 4 out of 6. The rest of this article looks at how different valuation methods arrive at that view, before finishing with a framework that can help you judge whether the stock fits your own approach.
Find out why Dassault Systèmes's -41.2% return over the last year is lagging behind its peers.
Approach 1: Dassault Systèmes Discounted Cash Flow (DCF) Analysis
A DCF model estimates what a stock could be worth by projecting the cash the business may generate in the future and discounting those cash flows back to today.
For Dassault Systèmes, the latest twelve month free cash flow is about €1.60b. Simply Wall St uses a 2 Stage Free Cash Flow to Equity model, combining analyst estimates for the next few years with longer term projections that are extrapolated beyond the formal forecast period. By 2030, projected free cash flow is €1.96b, with a series of annual projections between 2026 and 2035 that are discounted back to their present value.
Putting these cash flows together, the model arrives at an estimated intrinsic value of €23.42 per share, compared with a current share price of about €19.73. On this basis, the DCF output points to the stock trading at a 15.8% discount to the modelled fair value. Within this specific cash flow framework, the shares appear undervalued.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Dassault Systèmes is undervalued by 15.8%. Track this in your watchlist or portfolio , or discover 235 more high quality undervalued stocks .
Approach 2: Dassault Systèmes Price vs Earnings
For profitable companies, the P/E ratio is a useful shorthand because it compares what you pay for each share with the earnings that support that share. It links directly to how quickly earnings might grow over time and how predictable those earnings are.
In general, higher growth expectations and lower perceived risk tend to support a higher "normal" P/E ratio, while slower expected growth or greater uncertainty usually line up with a lower multiple. That is why simple comparisons are often made with sector and peer averages.
Dassault Systèmes currently trades on a P/E of 21.16x. This is below both the Software industry average of 23.08x and the peer average of 23.49x. Simply Wall St's Fair Ratio for the stock is 25.20x, which is a proprietary estimate of what the P/E might be given factors such as earnings growth, industry, profit margin, market cap and risk profile.
The Fair Ratio goes further than a basic peer or industry check because it adjusts for company specific characteristics instead of assuming one size fits all. Compared with the actual P/E of 21.16x, the Fair Ratio of 25.20x suggests the shares are trading below that modelled level.
Result: UNDERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 98 top founder-led companies .
Upgrade Your Decision Making: Choose your Dassault Systèmes Narrative
Earlier it was mentioned that there is an even better way to understand valuation, and that is where Narratives come in. They let you set a clear story for Dassault Systèmes that connects your expectations for its revenue, earnings and margins to a forecast and a fair value. You can then compare that Fair Value with the current share price so you can judge whether the stock looks attractive or stretched. This is all available within an easy tool on Simply Wall St's Community page that updates automatically when new news or earnings arrive. It already reflects very different viewpoints, such as a cautious Narrative that lines up with a Fair Value around €15.00 and a more optimistic one closer to €34.10 or even €46.00, so you can quickly see which story best matches how you see the company.
For Dassault Systèmes however we will make it really easy for you with previews of two leading Dassault Systèmes Narratives:
Start with the view that sees more upside from here.
Fair value: €23.15
Implied discount to fair value: about 14.8% below this narrative's fair value.
Revenue growth assumption: 4.26% a year.
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Focuses on growing adoption of cloud based, AI driven software and virtual twins that support a higher mix of recurring revenue and potentially stronger margins.
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Assumes revenue of about €7.1b and earnings of €1.5b by 2029, with profit margins rising from 19.2% to 21.3% and the stock trading on a P/E of 26.3x.
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Highlights risks around slower take up of new products, weaker performance in Life Sciences, deal timing, currency moves and higher costs that could pressure earnings if they persist.
Now compare that with a more cautious view built around lower fair value and thinner margins.
Fair value: €15.00
Implied premium to fair value: about 31.5% above this narrative's fair value.
Revenue growth assumption: 4.11% a year.
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Flags pressure from cloud native competitors, regulation and geopolitical fragmentation that could weigh on pricing power and margins, especially as the company continues to rely on legacy products and large enterprises.
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Assumes revenue of about €7.0b and earnings holding around €1.2b by 2029, with margins easing from 19.9% to 17.8% and the stock on a P/E of 20.5x.
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Accepts that recurring revenue is high and AI tools could help, but treats these as not enough to offset execution risk, higher costs and a tougher path to earnings growth.
Both narratives use the same starting point but reach very different conclusions, which is exactly why it helps to see the full context before deciding which story, if either, fits how you prefer to invest. See what the community is saying about Dassault Systèmes
Do you think there's more to the story for Dassault Systèmes? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include DSY.PA .
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
