Blackbaud Inc (BLKB, Financial), a renowned software solutions provider, witnessed a daily gain of 9.33% on November 01, 2023, despite a 3-month loss of -5.77%. With a reported Loss Per Share of 0.85, the question arises: Is the stock Fairly Valued? This article aims to answer this question through an in-depth valuation analysis. Read on to uncover the intrinsic value of Blackbaud (BLKB).
About Blackbaud Inc
Founded in 1981, Blackbaud Inc (BLKB, Financial) is a leading provider of software solutions designed to serve the "social good" community. The company's clientele includes nonprofits, foundations, corporations, educational institutions, healthcare institutions, and individual change agents. Blackbaud has expanded its portfolio through strategic M&A and organic product development, venturing into related areas outside of core fundraising, notably into K-12 schools. The firm enables more than $100 billion in donations annually across a customer base in excess of 40,000 customers in over 100 countries.
Here is the income breakdown of Blackbaud: 
Understanding the GF Value
The GF Value is a proprietary measure developed by GuruFocus that estimates a stock's intrinsic value. The GF Value Line, displayed on the summary page, represents the ideal fair trading value of the stock. This calculation considers three key factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
Blackbaud's stock is currently estimated to be fairly valued based on GuruFocus' valuation method. The stock's fair value is determined by historical multiples, an internal adjustment based on Blackbaud's past business growth, and analyst estimates of future business performance. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns. At its current price of $71.5 per share, Blackbaud has a market cap of $3.90 billion and is estimated to be fairly valued.
Since Blackbaud is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength poses a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are great ways to understand its financial strength. Blackbaud has a cash-to-debt ratio of 0.03, which ranks worse than 96.97% of 2739 companies in the Software industry. The overall financial strength of Blackbaud is 4 out of 10, indicating that its financial strength is poor.
This is the debt and cash of Blackbaud over the past years: 
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Blackbaud has been profitable for 9 years over the past 10 years. During the past 12 months, the company had revenues of $1.10 billion and a Loss Per Share of $0.85. Its operating margin of -3.01% is worse than 60.97% of 2767 companies in the Software industry. Overall, GuruFocus ranks Blackbaud's profitability as fair.
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Blackbaud is 3.3%, which ranks worse than 62.66% of 2397 companies in the Software industry. The 3-year average EBITDA growth rate is -12.8%, which ranks worse than 78.17% of 1993 companies in the Software industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Blackbaud's return on invested capital is -0.89, and its cost of capital is 9.94.
The historical ROIC vs WACC comparison of Blackbaud is shown below: 
Conclusion
In conclusion, the stock of Blackbaud (BLKB, Financial) is estimated to be fairly valued. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 78.17% of 1993 companies in the Software industry. To learn more about Blackbaud stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
