VIR
Vir Biotechnology, Inc.
$9.53
High-Growth Software
80%
Revenue × Terminal Margin DCF
Mild
·
Conviction
Overvalued
Trading 10.2% above fair value
You pay
$9.53
Bear
$4.74
Fair
$8.65
Bull
$11.78
Bear
$4.74
-50.2%
18% rev growth, 21% terminal margin
Fair
$8.65
-9.2%
30% rev growth, 28% terminal margin
Bull
$11.78
+23.7%
35% rev growth, 32% terminal margin
Key Value Driver
Revenue growth (30%) × margin expansion to 28%
Terminal Value % of EV
69%
Implied Market Multiple
19.4x
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 $21.71 from 12 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $8.65 per share.
Warnings
Stock-based employee pay is 72% 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 83% 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 $21.71 (from 12 analysts). Our estimate is 75% 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