Jack Henry & Associates, Inc.JKHYNASDAQ
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DCF Valuation
DCF Valuation Summary
Strong Buy
Fair Value: $258.10 per share(market-calibrated)
+57.2%
Upside to Fair Value
Current
$164.20
Pure Model
$276.66
Fair Value
$258.10
Bull Case
$349.57
Bear Case
$218.18
Market Reality Check
Model Terminal Growth
3.75%
Market-Implied Growth
0.63%
Calibrated Growth
2.66%
Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $276.66.
What's Driving This Ratingfor JKHY
✓
CapEx already efficient
CapEx at 3.17% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.
✓
Premium margins already priced in
EBIT margin of 26.88% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.
→
Moderate revenue growth
Analyst consensus projects 6.06% revenue growth, fading to 3.75% by Year 10. Revenue reaches $3.7B (vs $2.4B today).
🎯
Market pricing in lower growth than model
The market implies only 0.63% perpetual growth — 312bps 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 73.57% indicates efficient cash generation. FCF reaches $961M by Year 10 (25.67% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)0.71
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)7.69%
Cost of Debt
Pre-tax Cost of Debt5.00%
Tax Rate22.23%
After-tax Cost of Debt3.89%
Equity Weight (E/V)100.00%
Debt Weight (D/V)0.00%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (100.00% × 7.69%) + (0.00% × 3.89%)
= 7.69%
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 | $2.5B | $2.9B | $3.1B | $3.4B | $3.7B |
| EBIT | $677M | $767M | $837M | $901M | $1.0B |
| Tax | $151M | $171M | $186M | $200M | $224M |
| NOPAT | $527M | $597M | $651M | $701M | $783M |
| + Depreciation | $202M | $228M | $249M | $268M | $300M |
| - Capex | $80M | $91M | $99M | $106M | $119M |
| - Δ NWC | $3M | $4M | $2M | $2M | $3M |
| Free Cash Flow | $646M | $731M | $800M | $861M | $961M |
| Discount Factor | 0.929 | 0.801 | 0.690 | 0.595 | 0.476 |
| Present Value | $599M | $585M | $552M | $512M | $458M |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$961M
Terminal Growth Rate3.75%
WACC7.69%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$25.3B
PV of Terminal Value$12.0B
Exit Multiple Method
Year 10 EBITDA$1.3B
Exit Multiple (EV/EBITDA)28.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$36.6B
PV of Terminal Value$17.4B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$5.4B
PV of Terminal Value$12.0B
Enterprise Value$17.4B
(-) Net Debt-$102M
Equity Value$17.5B
Shares Outstanding73M
Price per Share$239.80
Exit Multiple Method
PV of Projected FCFs$5.4B
PV of Terminal Value$17.4B
Enterprise Value$22.8B
(-) Net Debt-$102M
Equity Value$22.9B
Shares Outstanding73M
Price per Share$313.52
Pure Model Fair Value
$276.66
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% |
|---|---|---|---|---|---|
| 5.69% | $358.44 | $386.19 | $420.67 | $403.95 | $388.02 |
| 6.69% | $299.22 | $312.73 | $330.83 | $356.32 | $388.02 |
| 7.69% | $259.35 | $267.03 | $276.66 | $289.08 | $305.71 |
| 8.69% | $229.63 | $234.42 | $240.19 | $247.26 | $256.12 |
| 9.70% | $206.08 | $209.27 | $213.01 | $217.43 | $222.74 |
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
$218.18
32.9% vs current
- • -25% vs analyst consensus
- • Terminal growth: 3.3%
- • Beta: 0.89
Base Case
$276.66
68.5% vs current
- • Analyst consensus
- • Terminal growth: 3.8%
- • Beta: 0.71
Bull Case
$349.57
112.9% vs current
- • +25% vs analyst consensus
- • Terminal growth: 4.3%
- • Beta: 0.60
Key Assumptions & Drivers• Technology Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth6.06%
Year 3 Revenue Growth6.63%
Year 5 Revenue Growth3.75%
Year 7 Revenue Growth3.75%
Year 10 Revenue Growth3.75%
Terminal Growth Rate3.75%
Margin & Efficiency
Current EBIT Margin26.88%
Tax Rate22.23%
Historical Capex / Rev3.17%
NWC / Revenue1.97%
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.