VRRM
Verra Mobility Corporation
$13.49
High-Growth Software
80%
Revenue × Terminal Margin DCF
Moderate
·
Conviction
Undervalued
Trading 30.7% below fair value
You pay
$13.49
Bear
$17.19
Fair
$19.48
Bull
$24.28
Bear
$17.19
+27.5%
8% rev growth, 21% terminal margin
Fair
$19.48
+44.4%
6% rev growth, 28% terminal margin
Bull
$24.28
+80.0%
8% rev growth, 32% terminal margin
Key Value Driver
Revenue growth (6%) × margin expansion to 28%
Terminal Value % of EV
54%
Implied Market Multiple
2.1x
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 $19.00 from 11 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $19.48 per share.
Warnings
Gross margin of 97% 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