Gartner, Inc.ITNYSE
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DCF Valuation
DCF Valuation Summary
Strong Buy
Fair Value: $487.61 per share(market-calibrated)
+195.9%
Upside to Fair Value
Current
$164.78
Pure Model
$527.31
Fair Value
$487.61
Bull Case
$676.10
Bear Case
$408.80
Market Reality Check
Model Terminal Growth
3.75%
Market-Implied Growth
0.50%
Calibrated Growth
2.61%
Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $527.31.
What's Driving This Ratingfor IT
✓
CapEx already efficient
CapEx at 1.50% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.
↑
Margin expansion modeled
Current EBIT margin is 21.16% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.4B (24.19% margin).
→
Moderate revenue growth
Analyst consensus projects 0.80% revenue growth, fading to 3.75% by Year 10. Revenue reaches $9.7B (vs $6.5B today).
🎯
Market pricing in lower growth than model
The market implies only 0.50% perpetual growth — 325bps below the model's 3.75%. This suggests the market sees headwinds or risks not in the model.
✓
Strong cash flow conversion
Year 10 FCF/EBITDA conversion of 71.27% indicates efficient cash generation. FCF reaches $1.9B by Year 10 (19.43% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)1.04
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)9.16%
Cost of Debt
Pre-tax Cost of Debt3.43%
Tax Rate24.68%
After-tax Cost of Debt2.58%
Equity Weight (E/V)76.63%
Debt Weight (D/V)23.37%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (76.63% × 9.16%) + (23.37% × 2.58%)
= 7.62%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
| Year | Year 1 | Year 3 | Year 5 | Year 7 | Year 10 |
|---|---|---|---|---|---|
| Revenue | $6.5B | $7.4B | $8.1B | $8.7B | $9.7B |
| EBIT | $1.4B | $1.6B | $1.8B | $2.0B | $2.4B |
| Tax | $342M | $386M | $450M | $504M | $581M |
| NOPAT | $1.0B | $1.2B | $1.4B | $1.5B | $1.8B |
| + Depreciation | $201M | $227M | $249M | $268M | $299M |
| - Capex | $98M | $111M | $122M | $131M | $146M |
| - Δ NWC | $5M | $49M | $29M | $31M | $35M |
| Free Cash Flow | $1.1B | $1.2B | $1.5B | $1.6B | $1.9B |
| Discount Factor | 0.929 | 0.802 | 0.693 | 0.598 | 0.480 |
| Present Value | $1.1B | $1.0B | $1.0B | $982M | $907M |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$1.9B
Terminal Growth Rate3.75%
WACC7.62%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$50.6B
PV of Terminal Value$24.3B
Exit Multiple Method
Year 10 EBITDA$2.7B
Exit Multiple (EV/EBITDA)28.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$74.3B
PV of Terminal Value$35.6B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$9.9B
PV of Terminal Value$24.3B
Enterprise Value$34.2B
(-) Net Debt$1.9B
Equity Value$32.3B
Shares Outstanding72M
Price per Share$448.50
Exit Multiple Method
PV of Projected FCFs$9.9B
PV of Terminal Value$35.6B
Enterprise Value$45.5B
(-) Net Debt$1.9B
Equity Value$43.6B
Shares Outstanding72M
Price per Share$606.13
Pure Model Fair Value
$527.31
Average of perpetuity growth and exit multiple methods (before market calibration)
Sensitivity AnalysisPrice per Share
| WACC ↓ / Growth → | 2.75% | 3.25% | 3.75% | 4.25% | 4.75% |
|---|---|---|---|---|---|
| 5.62% | $696.14 | $754.92 | $809.57 | $775.94 | $743.87 |
| 6.62% | $573.39 | $601.58 | $639.58 | $693.59 | $743.87 |
| 7.62% | $491.42 | $507.32 | $527.31 | $553.24 | $588.18 |
| 8.62% | $430.59 | $440.47 | $452.38 | $467.00 | $485.40 |
| 9.62% | $382.54 | $389.09 | $396.76 | $405.86 | $416.82 |
How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.
Scenario Analysis
Bear Case
$408.80
148.1% vs current
- • -25% vs analyst consensus
- • Terminal growth: 3.3%
- • Beta: 1.29
Base Case
$527.31
220.0% vs current
- • Analyst consensus
- • Terminal growth: 3.8%
- • Beta: 1.04
Bull Case
$676.10
310.3% vs current
- • +25% vs analyst consensus
- • Terminal growth: 4.3%
- • Beta: 0.88
Key Assumptions & Drivers• Technology Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth0.80%
Year 3 Revenue Growth7.09%
Year 5 Revenue Growth3.75%
Year 7 Revenue Growth3.75%
Year 10 Revenue Growth3.75%
Terminal Growth Rate3.75%
Margin & Efficiency
Current EBIT Margin21.16%
Terminal EBIT Margin25.00%
Tax Rate24.68%
Historical Capex / Rev1.50%
NWC / Revenue10.00%
Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.
Institutional-Grade Methodology
Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta
Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)
This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.