Is Guidewire Software's 26% Gain Justified After New Partnerships And Product Innovation?

Wondering if Guidewire Software is worth its current price? You’re not alone, especially with the market buzzing about software valuations lately.
Shares of Guidewire are up 26.0% this year, but are down 10.8% over the past month, adding a dose of volatility to the mix.
Much of the recent price movement comes as investors digest major news, including new partnerships with major insurers and product innovation that has kept Guidewire in the spotlight. These strategic moves have sparked optimism among some analysts, even as broader technology sentiment remains cautious.
When it comes to valuation, the company scores 0 out of 6 in our valuation checks, suggesting it is not undervalued by traditional measures. We’ll then break down these valuation approaches and, at the end of the article, share a way to get the full story behind the numbers.

Guidewire Software scores only 0/6 on our valuation checks. See what other warning signs we found in the full valuation overview.

A Discounted Cash Flow (DCF) model estimates the value of a company by projecting its future cash flows and discounting them to their current value. This approach examines what Guidewire Software could earn in the coming years and places less weight on future earnings the further away they are.

For Guidewire Software, analysts currently estimate free cash flow (FCF) at $278.9 million. Projections indicate annual free cash flow growth, with estimates rising to $536.2 million by 2028. Analyst estimates span about five years, after which Simply Wall St extrapolates the growth to provide a ten-year outlook.

Based on this DCF analysis, the calculated fair value for Guidewire Software stock is $149.24. This figure is approximately 43.1% below the current market price, implying that the stock is significantly overvalued based on this measure.

Result: EXCESS VALUE

Our Discounted Cash Flow (DCF) analysis shows that Guidewire Software may be overvalued by 43.1%. Discover 922 undervalued stocks or create your own screener to find better value opportunities.

GWRE discounted cash flow as of November 2025

To learn more about how we arrive at this fair value for Guidewire Software, visit the Valuation section of our company report.

For many software companies, the price-to-sales ratio (P/S) is a preferred valuation tool. Because many companies in this sector are still scaling or reinvesting heavily and may not be posting consistent profits, looking at sales instead of profits provides a clearer snapshot of relative value. The ‘right’ price-to-earnings ratio for a stock often depends on factors such as future growth prospects and risk, with higher growth and lower risk generally justifying higher multiples.

Guidewire Software currently trades at a price-to-earnings ratio of 15.1x. This is well above the software industry average of 4.7x and the peer group average of 7.8x. At first glance, the company seems expensive compared to these broad benchmarks.

However, Simply Wall St’s proprietary Fair Ratio is a dynamic measure that takes into account Guidewire’s growth, earnings, industry, market capitalization and associated risks. This approach suggests a reasonable P/S of 6.9x. As opposed to simply comparing against the sector or peers, the Fair Ratio provides a more tailored, holistic view of what the stock may be worth based on its unique characteristics.

Given that Guidewire Software’s True P/S Ratio of 15.1x is significantly higher than its Fair Ratio of 6.9x, the stock appears overvalued in this way.

Result: EXCESS VALUE

PS ratios tell one story, but what if the real opportunities lie elsewhere? Discover 1,440 companies where insiders are betting on explosive growth.

We’ve said before that there’s an even better way to understand appreciation, so let’s introduce you to Narratives. A story is a personal and flexible way to map out your investment thinking. It is the story you tell about a company, combining your beliefs (such as expected sales or profit margins) with a clear financial forecast and a justified fair value for the stock.

Narratives make investing more accessible by connecting the “why” behind the numbers, so you can turn your insights about a company into tangible forecasts that you can easily share or adjust. On the Simply Wall St Community page, millions of investors use Narratives to clarify their views and decision points, tracking how their fair value compares to the market price and instantly seeing when to consider buying or selling.

Best of all, stories are dynamic. When the news changes or new earnings are reported, these stories and their associated values are automatically updated, keeping your analysis current. For Guidewire Software, for example, some investors have a bullish narrative that expects earnings of $221 million and a price target as high as $290, while others may see only $114.9 million in earnings and put a fair value closer to $155. It all depends on your vision and assumptions.

Do you think there is more to the story for Guidewire Software? Check out our community to see what others are saying!

NYSE:GWRE Community Fair Values as of November 2025

This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.

Companies discussed in this article include GWRE.

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