PD
PagerDuty, Inc.
$16.16
High-Growth Software
80%
Revenue × Terminal Margin DCF
Moderate
·
Conviction
Fair Value
Trading 20.4% below fair value
Bear
$24.28
+50.3%
8% rev growth, 25% terminal margin
Fair
$20.30
+25.6%
1% rev growth, 33% terminal margin
Bull
$22.53
+39.4%
1% rev growth, 38% terminal margin
Adjust Assumptions
1.0%
33.0%
12.0%
Key Value Driver
Revenue growth (1%) × margin expansion to 33%
Terminal Value % of EV
42%
Implied Market Multiple
2.5x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (23 analysts)
$12.50
Divergence from AlphaVal
62%
Summary
Projecting 1% revenue growth with FCF margins expanding from 38% to 33% over 10 years, discounted at 12%, the base-case value is $20.30 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.
Wall Street's average price target is $12.50 (from 23 analysts). Our estimate is 62% above the consensus -- consider that gap carefully.
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