PDFS
PDF Solutions, Inc.
$55.93
High-Growth Software
80%
Revenue × Terminal Margin DCF
Strong
·
Conviction
Overvalued
Trading 94.5% above fair value
You pay
$55.93
Bear
$13.14
Fair
$28.75
Bull
$46.57
Bear
$13.14
-76.5%
12% rev growth, 17% terminal margin
Fair
$28.75
-48.6%
20% rev growth, 23% terminal margin
Bull
$46.57
-16.7%
26% rev growth, 26% terminal margin
Key Value Driver
Revenue growth (20%) × margin expansion to 23%
Terminal Value % of EV
67%
Implied Market Multiple
10.7x
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 $48.00 from 5 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $28.75 per share.
Warnings
Our estimate assumes profit margins grow from 0% to 23% over 10 years. If that improvement stalls, the company is worth considerably less.
Wall Street's average price target is $48.00 (from 5 analysts). Our estimate is 50% below 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