GWRE
Guidewire Software, Inc.
$136.13
Platform & Compounding FCF
80%
Two-stage FCF DCF
Moderate
·
Conviction
Overvalued
Trading 34.0% above fair value
You pay
$136.13
Bear
$69.39
Fair
$101.55
Bull
$136.57
Bear
$69.39
-49.0%
8% stage 1 growth, 11% discount
Fair
$101.55
-25.4%
14% stage 1 growth, 11% discount
Bull
$136.57
+0.3%
18% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (14% base case)
Terminal Value % of EV
42%
Implied Market Multiple
62.7x
Market is pricing in (growth)
24.2%
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 $207.13 from 26 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $101.55 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 $207.13 (from 26 analysts). Our estimate is 68% 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