Last Update 05 May 26

Fair value Decreased 19%

DAVA: AI Partnerships And Share Buybacks Will Support Future Turnaround Execution

Narrative Update on Endava

Analysts have trimmed their price targets on Endava by up to $2, with recent cuts to $9 and $6.50 reflecting updated views on fair value and future P/E. They also point to 2Q26 results as broadly in line with plans and note a slightly higher full year 2026 constant currency outlook.

Analyst Commentary

Recent research on Endava has focused on fine tuning valuation targets and reassessing execution risks around the current fiscal year. Price targets have been adjusted in a relatively narrow band, with neutral ratings maintained by JPMorgan and others. This keeps the spotlight on how well the company can deliver against its guidance rather than on a strong bullish or bearish call.

Bullish Takeaways

Analysts point to 2Q26 results as largely aligned with plan, which supports the view that management is executing in line with its own expectations, an important input into current valuation multiples.
The roughly 1 point uplift in the full year 2026 constant currency outlook signals some confidence in the revenue trajectory on an underlying basis, even after factoring out currency swings.
Guidance for 4Q26 implied in recent commentary is framed as topping consensus by about 2%, which some readers may see as a sign that near term growth expectations are not overly stretched.
JPMorgan keeping a Neutral rating while trimming its price target to $9 from $10 suggests that, in its view, the stock still has a place in a balanced portfolio, with valuation reset rather than a shift to an outright negative stance.

Bearish Takeaways

Multiple firms have reduced their price targets, including cuts to $9, $8, $6.50 and smaller trims, which points to a more cautious approach to what investors might be willing to pay for Endava on a P/E basis.
The 3Q26 outlook is described as weighed by foreign exchange and investments, which raises questions about near term margin pressure and how much of current spending will pay off in future growth.
Hold and Neutral ratings across the recent reports underline that analysts are hesitant to argue for a strong re rating, instead suggesting that risk and reward look more balanced at current levels.
References to price target cuts of $2 and $0.50 indicate that some prior expectations may have been too optimistic, prompting analysts to revisit their growth and execution assumptions and temper valuation frameworks accordingly.

What's in the News

Endava issued earnings guidance for 3Q26, with expected revenue between £182.0m and £185.0m, which would mean a constant currency revenue decline of 4.0% to 2.5% year over year. For full fiscal 2026, the company guided to revenue of £736.0m to £750.0m, implying a constant currency revenue decline of 3.5% to 1.5% year over year (Corporate Guidance).
Between May 1, 2025 and January 31, 2026, Endava repurchased 6,985,961 shares for $98.85m, representing 11.81% of its shares, completing a total buyback of 8,047,338 shares, or 13.59%, for $121.9m under the program announced on February 20, 2025 (Buyback Tranche Update).
Endava expanded its partnership with Cognition to scale agentic software delivery, integrating Cognition's Devin and Windsurf platforms into its Dava.Flow delivery framework. Early projects reported shorter task cycle times, time savings on repetitive work and improvements in testing discipline (Client Announcement, Cognition partnership).
Endava entered a partnership with Miro to deploy collaborative AI workflows across its roughly 12,000 employees, using Miro as a shared layer within Dava.Flow to compress decision cycles and to support joint go to market initiatives for large enterprise delivery transformations (Client Announcement, Miro partnership).

Valuation Changes

Fair Value: Revised lower from $10.51 to $8.56, indicating a reduction of about 19% in the central value estimate.
Discount Rate: Adjusted slightly higher from 13.17% to 13.43%, implying a modestly higher required return in the updated model.
Revenue Growth: Updated assumption increased from 1.61% to 2.27%, signalling a higher revenue growth input in the latest framework.
Net Profit Margin: Updated margin input almost doubled from 1.22% to 2.20%, reflecting a higher assumed earnings contribution relative to sales.
Future P/E: Reset from 48.57x to 22.10x, a significant compression in the valuation multiple used for Endava’s forward earnings.

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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 2.3% annually over the next 3 years.
Analysts assume that profit margins will increase from -0.4% today to 2.2% in 3 years time.
Analysts expect earnings to reach £17.5 million (and earnings per share of £0.28) by about May 2029, up from -£2.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting £24.4 million in earnings, and the most bearish expecting £10.9 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 22.4x on those 2029 earnings, up from -55.2x today. This future PE is greater than the current PE for the US IT industry at 21.0x.
Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 13.43%, 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 $8.56 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 $14.07, and the most bearish reporting a price target of just $5.0.
In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be £795.8 million, earnings will come to £17.5 million, and it would be trading on a PE ratio of 22.4x, assuming you use a discount rate of 13.4%.
Given the current share price of $4.17, the analyst price target of $8.56 is 51.3% 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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