PTC Inc.PTCNASDAQ

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DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $145.91 per share(market-calibrated)

-10.6%

Upside to Fair Value

Current

$163.14

Pure Model

$143.52

Fair Value

$145.91

Bull Case

$181.57

Bear Case

$110.73

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

5.64%

Calibrated Growth

4.03%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $143.52.

What's Driving This Ratingfor PTC

✓

CapEx already efficient

CapEx at 0.77% 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 26.37% — below the sector mature average of 35.86%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.1B (26.37% margin).

→

Moderate revenue growth

Analyst consensus projects 3.07% revenue growth, fading to 3.75% by Year 10. Revenue reaches $4.3B (vs $2.7B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $115.30/share (20.2x terminal FCF) while exit multiple gives $171.73/share (34.9x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $163.14, the market implies 5.64% perpetual growth — 189bps above the model's 3.75%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 80.32% indicates efficient cash generation. FCF reaches $1.1B by Year 10 (25.04% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.03

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)9.15%

Cost of Debt

Pre-tax Cost of Debt6.29%

Tax Rate20.23%

After-tax Cost of Debt5.02%

Equity Weight (E/V)93.46%

Debt Weight (D/V)6.54%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (93.46% × 9.15%) + (6.54% × 5.02%)

= 8.88%

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	$2.8B	$3.3B	$3.6B	$3.9B	$4.3B
EBIT	$745M	$862M	$949M	$1.0B	$1.1B
Tax	$151M	$174M	$192M	$207M	$231M
NOPAT	$594M	$687M	$757M	$814M	$910M
+ Depreciation	$136M	$157M	$173M	$186M	$208M
- Capex	$22M	$25M	$28M	$30M	$33M
- Δ NWC	$734,556.316	$2M	$1M	$1M	$1M
Free Cash Flow	$707M	$817M	$901M	$970M	$1.1B
Discount Factor	0.918	0.775	0.653	0.551	0.427
Present Value	$650M	$633M	$589M	$534M	$462M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.1B

Terminal Growth Rate3.75%

WACC8.88%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$21.9B

PV of Terminal Value$9.3B

Exit Multiple Method

Year 10 EBITDA$1.3B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$37.7B

PV of Terminal Value$16.1B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$5.7B

PV of Terminal Value$9.3B

Enterprise Value$15.0B

(-) Net Debt$1.2B

Equity Value$13.8B

Shares Outstanding120M

Price per Share$115.30

Exit Multiple Method

PV of Projected FCFs$5.7B

PV of Terminal Value$16.1B

Enterprise Value$21.8B

(-) Net Debt$1.2B

Equity Value$20.6B

Shares Outstanding120M

Price per Share$171.73

Pure Model Fair Value

$143.52

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%
6.88%	$180.75	$189.00	$199.89	$214.92	$236.99
7.88%	$155.69	$160.48	$166.44	$174.03	$184.04
8.88%	$136.85	$139.89	$143.52	$147.93	$153.41
9.88%	$121.86	$123.90	$126.28	$129.08	$132.42
10.88%	$109.49	$110.92	$112.56	$114.44	$116.63

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

$110.73

-32.1% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.29

Base Case

$143.52

-12.0% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.03

Bull Case

$181.57

11.3% 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 Growth3.07%

Year 3 Revenue Growth8.46%

Year 5 Revenue Growth3.75%

Year 7 Revenue Growth3.75%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin26.37%

Terminal EBIT Margin35.86%

Tax Rate20.23%

Historical Capex / Rev0.77%

NWC / Revenue0.87%

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.

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