• For investors considering whether Bentley Systems at around US$32.64 is starting to look like value or still carries more downside risk, this article walks through what the current price really implies.
• The stock has been under pressure, with returns falling 1.6% over the last week, 0.6% over the last month, 14.4% year to date, and 31.2% over the past year. Over longer periods, the 3 year and 5 year returns are down 33.6% and 45.9% respectively.
• Recent coverage has focused on how this extended period of share price weakness is reshaping expectations for Bentley Systems and sharpening investor focus on valuation. With sentiment already tested by multi year returns, many readers are now looking to understand whether the current price fairly reflects the business fundamentals.
• On Simply Wall St's valuation checklist, Bentley Systems scores 3 out of 6. The rest of this article will compare what different valuation methods say about the stock and will also point to a broader way of thinking about value at the end.

Approach 1: Bentley Systems Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a stock could be worth today by projecting the cash the business may generate in the future and then discounting those cash flows back to a present value.

For Bentley Systems, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $490.7 million. Analysts provide detailed estimates for the next few years, and Simply Wall St then extends those projections further, with free cash flow in 2026 and 2027 estimated at $543.2 million and $612.0 million respectively, and extrapolated out to $944.0 million by 2035.

On this basis, the DCF model points to an estimated intrinsic value of about $40.58 per share. Compared with the current share price of roughly $32.64, this implies the stock trades at about a 19.6% discount to that intrinsic value, which suggests the market price sits below what the model indicates.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Bentley Systems is undervalued by 19.6%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.

Approach 2: Bentley Systems Price vs Earnings

For profitable companies, the P/E ratio is a useful way to connect what you pay for the stock with the earnings the business is currently generating. A higher or lower P/E often reflects what the market is building in for future growth and how much risk investors feel they are taking on.

In general, faster expected earnings growth and lower perceived risk can support a higher P/E, while slower growth and higher risk tend to justify a lower multiple. Bentley Systems currently trades on a P/E of 36.25x. That sits above the broader Software industry average of about 29.33x, but below the peer group average of 63.74x.

Simply Wall St also uses a proprietary “Fair Ratio” to estimate what a more tailored P/E might look like for each company, based on factors such as earnings growth, profit margins, industry, market cap and risk profile. This can be more informative than a simple peer or industry comparison, which treats very different companies as if they were the same. For Bentley Systems, the Fair Ratio is 27.00x versus the current 36.25x, which points to the stock trading above that fair value estimate.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Bentley Systems Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives bring that to life by letting you attach a clear story about Bentley Systems to the numbers you see, such as your own view of fair value and your assumptions for future revenue, earnings and margins.

On Simply Wall St's Community page, Narratives are an accessible tool used by millions of investors to link a company story to a financial forecast and then to a fair value. This allows you to see in one place how your expectations translate into a number to compare with the current share price.

Narratives are also live, which means that when new information comes through, such as fresh earnings guidance or analyst price targets, the forecast and fair value in that Narrative update. You can quickly see whether your thesis still lines up with the latest data.

For Bentley Systems, one investor might build a Narrative around the higher analyst fair value of about US$58.69 with stronger margins and a higher future P/E, while another might lean toward the lower US$42.00 view with more modest assumptions. By comparing each Narrative's fair value to the current price, you can decide which story, and which set of assumptions, fits your own expectations best.

Do you think there's more to the story for Bentley Systems? 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.