GWRE
Guidewire Software, Inc.
$132.13
Platform & Compounding FCF
80%
Two-stage FCF DCF
Moderate
·
Conviction
Overvalued
Trading 31.1% above fair value
You pay
$132.13
Bear
$68.87
Fair
$100.80
Bull
$135.55
Bear
$68.87
-47.9%
8% stage 1 growth, 11% discount
Fair
$100.80
-23.7%
14% stage 1 growth, 11% discount
Bull
$135.55
+2.6%
18% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (14% base case)
Terminal Value % of EV
42%
Implied Market Multiple
60.7x
Market is pricing in (growth)
23.8%
vs 14.1% base
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $204.11 from 26 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $100.80 per share.
Warnings
Stock-based employee pay equals 231% of profits. This dilutes existing shareholders, so cash flow alone overstates what owners really earn.
Wall Street's average price target is $204.11 (from 26 analysts). Our estimate is 67% below the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions