PD
PagerDuty, Inc.
$7.20
High-Growth Software
80%
Revenue × Terminal Margin DCF
Strong
·
Conviction
Undervalued
Trading 48.2% below fair value
Bear
$16.42
+128.0%
8% rev growth, 21% terminal margin
Fair
$13.89
+93.0%
1% rev growth, 28% terminal margin
Bull
$15.60
+116.7%
1% rev growth, 32% terminal margin
Key Value Driver
Revenue growth (1%) × margin expansion to 28%
Terminal Value % of EV
46%
Implied Market Multiple
1.2x
Summary
Our base-case estimate uses a discounted cash flow model based on revenue growth and long-run free cash flow margins. We then blend that result with the average analyst price target of $14.80 from 23 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $13.89 per share.
Warnings
Gross margin of 85% means each dollar of revenue is highly profitable. As the company grows, overhead costs should shrink as a share of revenue, boosting overall profits.
Key Risks
- Current FCF misleads — the model values future margins, not today's cash
- SBC dilution is the hidden tax: 2-4% annual share growth compounds fast
- Revenue deceleration is inevitable — the question is when and how steep