VRRM
Verra Mobility Corporation
$4.12
High-Growth Software
80%
Revenue × Terminal Margin DCF
Strong
·
Conviction
Undervalued
Trading 68.2% below fair value
Bear
$15.19
+268.6%
8% rev growth, 21% terminal margin
Fair
$12.96
+214.5%
1% rev growth, 28% terminal margin
Bull
$14.80
+259.3%
1% rev growth, 32% terminal margin
Key Value Driver
Revenue growth (1%) × margin expansion to 28%
Terminal Value % of EV
51%
Implied Market Multiple
0.6x
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 $5.75 from 12 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $12.96 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.
Wall Street's average price target is $5.75 (from 12 analysts). Our estimate is 157% 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