If you’ve been keeping tabs on PAR Technology recently, it’s fair to wonder whether the roller coaster ride in its stock price is an opportunity or a warning sign. Over the last year, shares have posted a tough slide, dropping 51.0% since the start of the year and down 42.4% over the last twelve months. Even the short-term picture hasn’t offered much comfort, with a 3.1% decrease in just the last week and an 18.1% drop for the past month. Still, if you zoom out to the three-year mark, the stock is up 26.1%. This result shows that this company can surprise investors when the conditions are right.
Much of this recent volatility can be traced back to broader market shifts and sector pressures. Technology and restaurant-tech stocks, like PAR Technology, have faced mounting scrutiny as investors recalibrate risk and growth expectations. While there haven’t been dramatic company-specific headlines that single-handedly explain these swings, the general wariness around growth stocks has certainly played a part.
With all this in mind, the big question is, is PAR Technology trading at a bargain, or are the risks still too high? Looking at its valuation score, a 3 out of 6 based on six classic undervaluation checks, the picture is mixed. Let’s explore the main valuation approaches investors use to size up a stock, as well as a more insightful way to grasp what PAR Technology’s share price is really telling us.
The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by forecasting its future cash flows and discounting them back to today’s dollars. For PAR Technology, this approach uses a 2 Stage Free Cash Flow to Equity model, which projects how much cash the company could generate for shareholders in the coming years.
Currently, PAR Technology’s last twelve months’ Free Cash Flow (FCF) stands at negative $21.6 Million, reflecting ongoing reinvestments and growth initiatives. However, analysts estimate a major turnaround ahead, with FCF expected to reach $33.1 Million by the end of 2026. Beyond that, Simply Wall St extrapolates POW technology’s FCF, suggesting that by 2035, annual FCF could climb to $328 Million. The estimates for the later years are based more on long-term trends than concrete analyst forecasts.
When all ten-year cash flow projections are discounted back to present value, the DCF model places PAR Technology’s fair value at $80.62 per share. Considering the current share price trades at a 56.5% discount to this level, the assessment is that the stock is significantly undervalued based on its long-term cash flow potential.
Our Discounted Cash Flow (DCF) analysis suggests PAR Technology is undervalued by 56.5%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The Price-to-Sales (P/S) ratio is often used as a key valuation metric, especially for companies that are not yet profitable or operate in fast-growing industries like technology. For PAR Technology, the P/S ratio provides a reliable way to compare value relative to revenue, offering investors insight even when earnings are negative or volatile.
Growth expectations and risk both play a large role in shaping what is considered a fair P/S ratio. Higher-growth businesses, or those with unique products and large addressable markets, tend to justify higher P/S multiples. On the other hand, if there is more uncertainty or lower expected sales growth, a lower P/S is generally seen as appropriate.
Currently, PAR Technology trades at a P/S ratio of 3.40x. This is just above the average for its peer group, which stands at 3.34x, and well below the software industry average of 4.96x. However, Simply Wall St’s proprietary Fair Ratio for PAR Technology is 2.66x. Unlike a simple comparison to peers or the industry, the Fair Ratio takes into account specific factors such as the company’s sales growth, profit margins, market risks, and size, providing a more tailored benchmark for fair value.
Comparing PAR Technology’s 3.40x P/S with its Fair Ratio of 2.66x suggests the stock is trading at a premium to what would typically be justified given its current fundamentals. While it is not excessively above the fair value line, it does indicate a degree of overvaluation on this metric alone.
Earlier, we mentioned a better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your personal story or perspective about a company. Your expectations for its future revenue, earnings, and margins connect the story behind the business to a logical financial forecast and an estimated fair value.
Rather than relying only on formulas or consensus, Narratives allow every investor to define how they believe the future will unfold for a stock, and to see what a fair price would look like if their view turns out to be right. On Simply Wall St’s Community page, where millions of investors share their thinking, anyone can create, update, or follow Narratives as easily as editing a profile.
These Narratives help you decide when to buy or sell by directly comparing your own estimated Fair Value to the current share price. They are always current, too, since they update instantly in response to new earnings, news, or key announcements that could affect the outlook.
For example, the most bullish Narrative for PAR Technology sees strong global platform adoption and recurring revenue growth driving a Fair Value of $97, while the most cautious Narrative, considering risks like execution delays and competition, puts Fair Value at just $50. You decide which story makes sense for you.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
