BlackBerry (TSX:BB) has quietly turned into a more interesting stock again, with shares up about 56% over the past year, even after a choppy past month. That kind of move naturally raises valuation questions.
See our latest analysis for BlackBerry.
Recent trading has been volatile, with a 30 day share price return of minus 16.0 percent after a strong 1 year total shareholder return of 55.77 percent. This suggests momentum is consolidating after a big run.
If BlackBerry has you watching legacy names reinvent themselves, it could be worth scanning other high growth tech and AI stocks that are shaping the next phase of digital security and software.
With revenues back to modest growth, a small profit on the books, and shares now trading almost exactly at analyst targets, the key question is simple: Is BlackBerry still mispriced, or is the market already baking in its next chapter?
On conventional metrics, BlackBerry looks richly priced, with the stock trading at a Price to Earnings ratio of 121.6 times its earnings at the last close of CA$5.67.
The price to earnings multiple compares what investors are willing to pay today for each dollar of current earnings, a common yardstick for mature and emerging software names alike. For a company that has only recently turned profitable, a lofty multiple usually implies investors are banking on strong future profit growth rather than current results.
BlackBerry’s valuation premium is clear, with its 121.6 times earnings multiple towering over the Canadian Software industry average of 50.7 times and the estimated fair Price to Earnings ratio of 36.7 times. That gap suggests the market is assigning a far higher growth or quality premium than both peers and the SWS fair ratio model indicate, and it highlights how far the multiple could compress if sentiment or growth expectations cool.
Explore the SWS fair ratio for BlackBerry
Result: Price-to-Earnings of 121.6x (OVERVALUED)
However, BlackBerry still faces execution risk in monetising QNX and IVY, and any slowdown in cybersecurity demand could quickly pressure its premium valuation.
Find out about the key risks to this BlackBerry narrative.
While earnings multiples flag BlackBerry as expensive, our DCF model tells a different story. On that view, the shares trade about 84.9% below an estimated fair value of roughly CA$37.64, which implies the market could be deeply discounting its long term cash flow potential. Which lens do you trust more?
Look into how the SWS DCF model arrives at its fair value.