WDAY
Workday, Inc.
$128.14
High-Growth Software
80%
Revenue × Terminal Margin DCF
Moderate
·
Conviction
Undervalued
Trading 31.7% below fair value
You pay
$128.14
Bear
$115.40
Fair
$187.51
Bull
$259.92
Bear
$115.40
-9.9%
9% rev growth, 20% terminal margin
Fair
$187.51
+46.3%
15% rev growth, 26% terminal margin
Bull
$259.92
+102.8%
19% rev growth, 30% terminal margin
Key Value Driver
Revenue growth (15%) × margin expansion to 26%
Terminal Value % of EV
50%
Implied Market Multiple
3.3x
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 $183.82 from 81 analysts, using a 35% weight on analyst consensus. That produces an estimated intrinsic value of $187.51 per share.
Warnings
Gross margin of 76% 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