RCUS
Arcus Biosciences, Inc.
$22.51
High-Growth Software
80%
Revenue × Terminal Margin DCF
Mild
·
Conviction
Overvalued
Trading 5.3% above fair value
You pay
$22.51
Bear
$12.44
Fair
$21.37
Bull
$32.70
Bear
$12.44
-44.7%
16% rev growth, 21% terminal margin
Fair
$21.37
-5.1%
26% rev growth, 28% terminal margin
Bull
$32.70
+45.3%
34% rev growth, 32% terminal margin
Adjust Assumptions
26.0%
28.0%
12.0%
Key Value Driver
Revenue growth (26%) × margin expansion to 28%
Terminal Value % of EV
69%
Implied Market Multiple
7.9x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (18 analysts)
$40.00
Divergence from AlphaVal
47%
Summary
Projecting 26% revenue growth with FCF margins expanding from 0% to 28% over 10 years, discounted at 12%, the base-case value is $21.37 per share.
Warnings
Stock-based employee pay is 24% of revenue — your ownership shrinks by about 2.0% each year as new shares are issued. Our estimate already accounts for this dilution.
Our estimate assumes profit margins grow from 0% to 28% over 10 years. If that improvement stalls, the company is worth considerably less.
Gross margin of 96% 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 $40.00 (from 18 analysts). Our estimate is 47% 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