Last Update 25 May 26

Fair value Decreased 24%

DAVA: AI Partnerships And Delivery Improvements Will Support Future Turnaround Execution

Narrative Update on Endava

Analysts have cut Endava's fair value estimate from about $8.56 to $6.51, reflecting lower price targets in the $4 to $5 range after repeated earnings misses, outlook cuts, mounting demand pressures, and ongoing questions around revenue predictability and delivery execution.

Analyst Commentary

Recent Street research on Endava has turned more cautious, with multiple firms cutting price targets and at least one high profile downgrade. The commentary highlights a mix of concerns around execution, demand trends, and earnings reliability, while still acknowledging potential upside if certain pressures ease.

Bullish Takeaways

Bullish analysts who maintain positive ratings see the current share price and reduced targets in the US$4 to US$5 range as already reflecting a good portion of the recent earnings and guidance disappointments. They view this as creating potential upside if performance stabilizes.
Some commentary points to possible AI related opportunities over time, with the view that once broader client budgets improve, these themes could support growth and help rebuild confidence in the stock's longer term potential.
Supportive analysts appear willing to look through the latest fiscal Q3 miss and outlook revision, viewing the pressures as tied to weaker demand rather than a permanent impairment of the business model.

Bearish Takeaways

Bearish analysts focus on the pattern of repeated earnings misses and guidance cuts, which they see as undermining confidence in Endava's revenue predictability and making its valuation harder to justify, even after recent price target reductions.
Commentary highlights broad based weakness in fiscal Q3 results and a lower FY26 outlook, which raise concerns that end market demand could stay under pressure and limit near term growth, even if longer term themes like AI eventually help.
JPMorgan flags what it sees as ongoing issues linked to adverse revenue exposure and suboptimal delivery, suggesting that these operational challenges could continue to affect growth rates and execution, rather than being just a short term pipeline conversion issue.
With price targets cut from prior levels such as US$8 or US$9 down to the US$4 to US$5 range, more cautious research views imply that investors may require clearer evidence of consistent delivery and steadier guidance before assigning a higher valuation multiple.

What's in the News

Issued revenue guidance for the fourth quarter of fiscal 2026, with management expecting revenue between £181.0m and £185.0m. (Company guidance)
Provided full fiscal year 2026 revenue guidance in a range of £721.8m to £725.8m. (Company guidance)
Recorded a goodwill impairment charge of £364.624m in the third quarter ended March 31, 2026, treated as an exceptional item in the condensed consolidated statements of comprehensive income, driven by year to date performance and updated long term forecasts through fiscal 2031 and beyond. (Company filing)
Entered a partnership with Tyl by NatWest, the merchant payments unit of NatWest Group, to support a more integrated payments acceptance experience for Tyl customers, using Endava’s global operations, AI native delivery model Dava.Flow and Payments Gateway Accelerator components. (Company announcement)
The collaboration with Tyl by NatWest is aimed at increasing the speed of bringing new products and services to market and supporting flexibility, scalability and performance across the payments lifecycle, while reinforcing NatWest’s focus on its merchant payments offering. (Company announcement)

Valuation Changes

Fair Value: cut from $8.56 to $6.51, a reduction of about 24% in the updated estimate.
Discount Rate: risen slightly from 13.43% to 13.56%, indicating a modestly higher required return in the model.
£ Revenue Growth: revised higher from 2.27% to 2.91%, pointing to a somewhat stronger top line growth assumption.
£ Profit Margin: reduced from 2.20% to 1.41%, a meaningful step down in expected profitability.
Future P/E: raised from 22.1x to 29.2x, implying a higher valuation multiple applied to forward earnings despite the lower fair value.

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Key Takeaways

Focus on AI capabilities and long-term deals may drive revenue growth, expanding the addressable market and providing earnings stability.
Acquisitions and share buyback program aim to boost operational efficiencies and enhance shareholder value through synergies and increased EPS.
Economic uncertainty and project delays may lead to unpredictable revenue streams and affect Endava's overall profitability and operational efficiency.

Catalysts

About Endava

Provides technology services in North America, Europe, the United Kingdom, and internationally.What are the underlying business or industry changes driving this perspective?

Endava's focus on AI-enabled capabilities, such as Morpheus and Compass, positions it to leverage the digital shift, potentially expanding its addressable market and driving future revenue growth through AI-driven services.
The company's strategy of securing larger and longer-term deals, particularly in core modernization projects, is expected to contribute to meaningful revenue growth and stability in earnings, despite longer sales cycles.
Endava's acquisition and integration of GalaxE is anticipated to enhance operational efficiencies and support margin improvement, as it realizes cost synergies and operational alignment.
The introduction of a $100 million share buyback program signals a strategic effort to enhance shareholder value, which may boost earnings per share by reducing the number of shares outstanding.
As Endava continues to develop AI applications across various sectors, such as pharmaceuticals, insurance, and automotive, it opens opportunities for new revenue streams and the potential for improved net margins through innovative, high-value solutions.

Endava Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Endava's revenue will grow by 2.9% annually over the next 3 years.
Analysts assume that profit margins will increase from -56.1% today to 1.4% in 3 years time.
Analysts expect earnings to reach £11.2 million (and earnings per share of £0.2) by about May 2029, up from -£408.3 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting £34.2 million in earnings, and the most bearish expecting £-22.4 million.
In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 29.5x on those 2029 earnings, up from -0.3x today. This future PE is greater than the current PE for the US IT industry at 20.8x.
Analysts expect the number of shares outstanding to decline by 3.84% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 13.56%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

The slower sales cycle and elongated ideation to production cycle for AI-led projects could lead to less predictable revenue streams and potentially impact revenue growth if projects take longer to materialize.
The macroeconomic challenges in key regions like the U.K. and Rest of World, as well as reduced spending from clients due to economic uncertainty, could negatively affect Endava's revenue and earnings.
Endava's high reliance on large-scale projects and the slower scaling of these projects may lead to volatility in revenue realization and impact net margins if clients delay commencements.
A decrease in revenue from specific verticals, such as payments and TMT due to client pullbacks, could lead to uneven revenue distribution across sectors and affect overall profitability.
Integration challenges and costs associated with new acquisitions, like GalaxE, may affect operational efficiency and net margins in the short term if synergies do not materialize as planned.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $6.51 for Endava based on their expectations of its future earnings growth, profit margins and other risk factors.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $10.99, and the most bearish reporting a price target of just $4.01.
In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be £792.9 million, earnings will come to £11.2 million, and it would be trading on a PE ratio of 29.5x, assuming you use a discount rate of 13.6%.
Given the current share price of $3.33, the analyst price target of $6.51 is 48.8% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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