DCF Studio

    TYL · NYQ · Technology

    Tyler Technologies, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 100.45

    Market price

    USD 337.50

    Implied upside

    -70.2%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages 2.29% of revenue against depreciation of 7.88%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 7.88% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.

    Current EV/EBITDA of 26.4x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 100.45-70.2%
    Exit multiple
    USD 256.28-24.1%
    Market price
    USD 337.50

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m189m379mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 2.5bnUSD 2.7bnUSD 2.9bnUSD 3.2bnUSD 3.4bn+8.0%
    EBITUSD 328.3mUSD 354.7mUSD 383.1mUSD 413.9mUSD 447.1m+8.0%
    NOPATUSD 277.5mUSD 299.8mUSD 323.8mUSD 349.8mUSD 377.9m+8.0%
    Add depreciation & amortisationUSD 198.5mUSD 214.4mUSD 231.6mUSD 250.2mUSD 270.3m+8.0%
    Less capital expenditureUSD -198.5mUSD -214.4mUSD -231.6mUSD -250.2mUSD -270.3m+8.0%
    Less increase in working capitalUSD 757.5kUSD 818.3kUSD 884.0kUSD 955.0kUSD 1.0m-8.0%
    Free cashflow to firmUSD 278.3mUSD 300.6mUSD 324.7mUSD 350.8mUSD 378.9m+8.0%
    Discount factor0.95500.87110.79450.72470.6610-
    Present valueUSD 265.8mUSD 261.8mUSD 258.0mUSD 254.2mUSD 250.4m-1.5%
    Present Value Of The ForecastUSD 1.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.889Reported 0.835, pulled toward 1.0 (Blume)
    Cost of equity9.89%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 13.8bn95.6% of capital
    Total debtUSD 642.6m4.4% of capital, book value as a proxy
    Tax rate15.5%Effective, capped at statutory
    WACC9.64%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 100.45

    67% of EV

    Forecast FCFF, final year
    USD 378.9m
    Capex at depreciation, working capital in reinvestment
    USD 377.9m
    Less reinvestment at g/ROIC (25.9% of NOPAT)
    USD -98.0m
    Capitalised
    USD 279.9m
    ROIC (WACC floor)
    9.6%
    Terminal value, undiscounted
    USD 4.0bn
    Terminal value, discounted
    USD 2.7bn
    Enterprise value
    USD 3.9bn
    Less net debt
    USD -454.6m
    Equity value
    USD 4.4bn

    Exit at 20.0x EBITDA

    Value per shareUSD 256.28

    88% of EV

    Terminal value, undiscounted
    USD 14.3bn
    Terminal value, discounted
    USD 9.5bn
    Enterprise value
    USD 10.8bn
    Less net debt
    USD -454.6m
    Equity value
    USD 11.2bn

    Spread between methods: 87%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.64%123.50123.91124.31124.72125.13
    8.64%110.31110.65110.99111.34111.68
    9.64%99.86100.16100.45100.75101.04
    10.64%91.3991.6591.9092.1692.42
    11.64%84.3884.6184.8385.0685.29

    Outlined: this model. Green text: above today's price of 337.50. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year8.0%43.7%+35.6pp
    EBIT margin13.0%47.4%+34.3pp
    Discount rate9.6%3.9%-5.7pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.