XNCR
Xencor, Inc.
$11.31
High-Growth Software
80%
Revenue × Terminal Margin DCF
Moderate
·
Conviction
Undervalued
Trading 28.6% below fair value
You pay
$11.31
Bear
$10.83
Fair
$15.84
Bull
$21.15
Bear
$10.83
-4.3%
10% rev growth, 21% terminal margin
Fair
$15.84
+40.0%
16% rev growth, 28% terminal margin
Bull
$21.15
+87.0%
21% rev growth, 32% terminal margin
Key Value Driver
Revenue growth (16%) × margin expansion to 28%
Terminal Value % of EV
67%
Implied Market Multiple
3.8x
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 $27.50 from 27 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $15.84 per share.
Warnings
Stock-based employee pay is 34% 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 92% 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 $27.50 (from 27 analysts). Our estimate is 57% 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