Serviceware SE (ETR:SJJ): A Hidden Gem in the SaaS Transition with Strong Insider Backing

Serviceware SE (ETR:SJJ), a German software firm specializing in enterprise service management solutions, is emerging as a compelling growth opportunity for investors. With strong insider ownership, accelerating SaaS revenue growth, and a valuation that lags far behind intrinsic value, the stock presents a rare combination of catalysts. Let's dissect why this could be a winning investment.

Strong Insider Ownership: A Catalyst for Long-Term Success

Serviceware's management holds an extraordinary 62.79% stake in the company, with CEO Dirk Martin and CFO Harald Popp each owning 31% of the shares. This level of insider ownership is a rarity in public markets and creates a powerful alignment of interests. Their combined €82 million investment in the company (based on a €124.9 million market cap) means their personal wealth is directly tied to Serviceware's success. This structure discourages short-termism and incentivizes decisions that prioritize long-term value creation. With institutional ownership at just 21.85% and a free float of 37.2%, the stock's limited trading volume also suggests it's underfollowed, leaving room for appreciation as more investors discover its potential.

Positive Earnings Growth Outlook: Transition to SaaS Fuels Momentum

Serviceware's financial performance is accelerating as it transitions from one-off software licenses to a subscription-based SaaS model. In Q1 2025, revenue rose 11.2% year-over-year to €27.8 million, with SaaS/Service revenue surging 30.5% to €20.8 million—now representing 74.9% of total revenue. This shift is critical: recurring revenue streams provide predictability and scalability.

While EBITDA remains modest at €0.7 million, the company's focus is on building a durable SaaS business. Contract liabilities—a metric tracking deferred revenue from long-term contracts—jumped 26% to €101.59 million as of February 2025, signaling strong demand for its services. Management forecasts 5-15% annual revenue growth for fiscal 2024/25, driven by AI integration, international expansion (notably in North America and Italy), and new Fortune 500 partnerships.

Discount to Intrinsic Value: A Stock Undervalued by Analysts

At a current price of approximately €12 per share (based on a €124.9 million market cap and 10.5 million shares outstanding), Serviceware trades at a steep discount to its potential. Analysts at Montega and Quirin Bank have “Buy” ratings with price targets of €21 and €25.50, respectively—implying 75-113% upside.

The company's valuation also looks attractive relative to peers. With a price-to-sales (P/S) ratio of ~1.1x (calculated using a trailing annual revenue estimate of €111 million), it trades at a fraction of SaaS peers like Atlassian (P/S ~9x) or ServiceNow (P/S ~6x). While Serviceware is earlier in its SaaS journey, its rapid revenue growth and dominant market share in enterprise service management suggest it's undervalued.

Risks to Consider

• Transition Challenges: The shift to SaaS requires upfront investment and may delay short-term profitability.
• Competitive Landscape: Rival SaaS providers like BMC Software and Ivanti could intensify competition.
• Macro Uncertainties: Economic slowdowns could reduce enterprise IT spending.

Investment Thesis

Serviceware SE is a rare blend of insider alignment, accelerating SaaS growth, and a compelling valuation. With management's majority stake, there's little doubt about their commitment to unlocking value. The stock's ~€12 price is far below analyst targets and ignores the company's strong fundamentals. For investors seeking exposure to the SaaS boom in an underfollowed stock, Serviceware could be a hidden gem poised for a multiyear upswing.

Recommendation: Buy Serviceware SE (ETR:SJJ) with a price target of €21-€25.50. The risk-reward profile is strongly skewed to the upside, especially as the SaaS transition gains momentum and institutional ownership grows.