Sapiens' (SPNS) Strong Portfolio, Clientele Make It a Buy Now
Sapiens International SPNS shares have returned 19.4% year to date, outperforming the Zacks Computer Software industry’s growth of 18.1% and the Zacks Computer and Technology sector’s return of 16.7%.
SPNS has been benefiting from an innovative SaaS portfolio, which is helping it win new customers and drive top-line growth. Its expanding partner base, which includes the likes of Microsoft MSFT, DataCrest, Binah.ai, Deloitte, PWC and LTIMindtree, has been a key catalyst. SPNS is one of the few selected vendors collaborating with MSFT on OpenAI.
Sapiens has witnessed a top-line CAGR of 14.7% between 2012 and 2023, driven by its strong portfolio and partner base. It reported revenues of $514.8 million in 2023 with more than 600 customers across 30 plus countries. In the first quarter of 2024, revenues increased 7.6% year over year to $134.2 million. Annualized recurring revenue (ARR) grew 12.7% year over year to $168 million.
Strong Portfolio to Aid SPNS Stock Go Higher
Expanding product capabilities and a strong partner base are expected to help Sapiens generate healthy returns.
SPNS YTD Performance
Image Source: Zacks Investment Research
SPNS recently launched its cutting-edge AI-powered, cloud-native insurance platform. The Sapiens Insurance Platform is designed to leverage digital engagement, data intelligence, core business processing solutions, and advanced machine learning and generative AI (GenAI) capabilities to help insurers innovate and stay competitive in today’s dynamic market.
In a move to strengthen its footprint in the Medical Professional Liability (MPL) domain, SPNS recently announced a strategic investment in Sapiens CoreSuite for MPL. This initiative aims to drive growth and innovation within the MPL industry by enhancing capabilities in policy administration, finance, claims and risk management.
SPNS’ advanced, integrated solution is designed to manage the complexities of MPL operations and adapt swiftly to new regulatory requirements and industry standards. Enhanced functionality, flexibility and superior user experiences are key features of Sapiens CoreSuite for MPL, offering substantial new business value.
It recently launched version 9 of its ReinsuranceMaster solution, which includes automating global inter-company retrocession, facilitating U.S. NAIC statutory reporting (Schedule F), and real-time reinsurance allocation support (‘reinsurance as a service’). The latest version also includes an integration between Sapiens Intelligence and ReinsuranceMaster.
IntegrateAI, the newest capability from Sapiens Decision, integrates machine learning models into the business-friendly decision model workbench. IntegrateAI follows Sapiens Decision's recent ModelAI release, which brings a Gen AI copilot to decision modelers with integration to Microsoft Azure’s OpenAI Service.
Moreover, Sapiens Decision is planning additional AI-based products to support the full lifecycle of the decision modeling process, including ExtractAI (for extracting decision logic from legacy code) and OptimizeAI (to optimize business decisions for specific outcomes).
Sapiens’ strong portfolio is expected to provide a boost to its growth opportunities in the insurance software sector. Its targeted total addressable market (TAM) is worth $60 billion, with a Property & Casualty (P&C) sector TAM of $27 billion and Life Pensions & Annuity (LP&A) of $33 billion.
Insurance IT spending is currently pegged at $208 billion, per Gartner, with $73 billion spent on P&C and $88 billion on LP&A domains. This massive expenditure offers significant growth opportunities to Insurtech providers like Sapiens.
Expanding International Footprint Aids Prospect
SPNS’ expanding international footprint in the U.K., Germany, the Caribbean, Thailand and Canada is noteworthy.
Sapiens recently announced that Bangkok Insurance Public Company Limited, a leading insurer in Thailand, has successfully implemented the Sapiens Property & Casualty (P&C) platform. This implementation, which includes the Sapiens IDITSuite for Property & Casualty, Sapiens ReinsuranceMaster and Sapiens Intelligence, marks one of the most extensive and complex projects in the Thai insurance sector to date.
Republic Life, a Caribbean-based company, adopted Sapiens CoreSuite for Life & Annuities and Sapiens Digital Suite hosted on Microsoft Azure cloud. Sapiens expanded its footprint into Canada on the back of its Saskatchewan Workers’ Compensation Board partnership.
Meanwhile, BHSF, a U.K. “profit for good” health and wellbeing provider, has chosen to deploy the Sapiens Platform, including Sapiens IDITSuite for P&C and Sapiens DigitalSuite. German pet insurance brand Cleo also deployed Sapiens SCIPSuite to accelerate its underwriting, digital sales and go-to-market processes.
Sapiens’ Outlook Remains Positive
For 2024, the company expects revenues between $550 million and $555 million. The Zacks Consensus Estimate for 2024 revenues is pegged at $553.45 million, indicating year-over-year growth of 7.55%.
Operating income is expected between $99.6 million and $102.7 million. SPNS still expects a non-GAAP operating margin between 18.1% and 18.5%.
The consensus mark for earnings is pegged at $1.48 per share, unchanged over the past 30 days, indicating 9.63% over 2023.
Zacks Rank & Other Stocks to Consider
Sapiens currently sports a Zacks Rank #1 (Strong Buy).
Datadog DDOG and Dropbox DBX are a couple of other top-ranked stocks in the broader sector, each sporting a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Year to date, shares of DDOG have gained 8.3% while DBX declined 23.3%, respectively.
Long-term earnings growth rates for Datadog and Dropbox are currently pegged at 9.56% and 11.44%, respectively.
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