ZYME
Zymeworks Inc.
$25.61
High-Growth Software
80%
Revenue × Terminal Margin DCF
Moderate
·
Conviction
Overvalued
Trading 25.4% above fair value
You pay
$25.61
Bear
$10.44
Fair
$20.42
Bull
$33.03
Bear
$10.44
-59.2%
16% rev growth, 21% terminal margin
Fair
$20.42
-20.3%
27% rev growth, 28% terminal margin
Bull
$33.03
+29.0%
35% rev growth, 32% terminal margin
Key Value Driver
Revenue growth (27%) × margin expansion to 28%
Terminal Value % of EV
69%
Implied Market Multiple
15.8x
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 $38.25 from 20 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $20.42 per share.
Warnings
Stock-based employee pay is 26% 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 100% 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 $38.25 (from 20 analysts). Our estimate is 62% 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