Tyler Technologies, Inc.TYLNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Buy

Fair Value: $413.87 per share(market-calibrated)

+16.7%

Upside to Fair Value

Current

$354.62

Pure Model

$413.48

Fair Value

$413.87

Bull Case

$529.46

Bear Case

$319.21

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

3.85%

Calibrated Growth

3.76%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $413.48.

What's Driving This Ratingfor TYL

✓

CapEx already efficient

CapEx at 1.67% 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 20.45% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $963M (24.05% margin).

→

Moderate revenue growth

Analyst consensus projects 8.58% revenue growth, fading to 3.75% by Year 10. Revenue reaches $4.0B (vs $2.3B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $349.29/share (23.0x terminal FCF) while exit multiple gives $477.67/share (35.8x 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.

✓

Model and market roughly agree

Market-implied terminal growth of 3.85% is close to the model's 3.75% (only 10bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 78.25% indicates efficient cash generation. FCF reaches $957M by Year 10 (23.89% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.90

Market Risk Premium4.50%

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

Cost of Equity (Re)8.54%

Cost of Debt

Pre-tax Cost of Debt2.55%

Tax Rate19.14%

After-tax Cost of Debt2.06%

Equity Weight (E/V)95.76%

Debt Weight (D/V)4.24%

WACC Calculation

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

WACC = (95.76% × 8.54%) + (4.24% × 2.06%)

= 8.26%

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	$3.0B	$3.3B	$3.6B	$4.0B
EBIT	$518M	$618M	$736M	$830M	$963M
Tax	$99M	$118M	$141M	$159M	$184M
NOPAT	$419M	$500M	$595M	$671M	$779M
+ Depreciation	$164M	$196M	$216M	$233M	$260M
- Capex	$42M	$51M	$56M	$60M	$67M
- Δ NWC	$20M	$24M	$12M	$13M	$14M
Free Cash Flow	$521M	$621M	$743M	$831M	$957M
Discount Factor	0.924	0.788	0.672	0.574	0.452
Present Value	$481M	$489M	$500M	$476M	$433M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$957M

Terminal Growth Rate3.75%

WACC8.26%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$22.0B

PV of Terminal Value$9.9B

Exit Multiple Method

Year 10 EBITDA$1.2B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$34.2B

PV of Terminal Value$15.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$4.8B

PV of Terminal Value$9.9B

Enterprise Value$14.7B

(-) Net Debt-$339M

Equity Value$15.1B

Shares Outstanding43M

Price per Share$349.29

Exit Multiple Method

PV of Projected FCFs$4.8B

PV of Terminal Value$15.5B

Enterprise Value$20.2B

(-) Net Debt-$339M

Equity Value$20.6B

Shares Outstanding43M

Price per Share$477.67

Pure Model Fair Value

$413.48

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%
6.26%	$523.72	$554.10	$596.56	$660.13	$636.64
7.26%	$446.67	$462.99	$483.95	$511.87	$550.90
8.26%	$391.63	$401.47	$413.48	$428.49	$447.77
9.26%	$349.20	$355.59	$363.14	$372.19	$383.25
10.26%	$314.91	$319.29	$324.33	$330.22	$337.17

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

$319.21

-10.0% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.12

Base Case

$413.48

16.6% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 0.90

Bull Case

$529.46

49.3% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 0.76

Key Assumptions & Drivers• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth8.58%

Year 3 Revenue Growth8.80%

Year 5 Revenue Growth3.75%

Year 7 Revenue Growth3.75%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin20.45%

Terminal EBIT Margin25.00%

Tax Rate19.14%

Historical Capex / Rev1.67%

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.

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