VeriSign, Inc.VRSNNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $324.96 per share(market-calibrated)

+38.0%

Upside to Fair Value

Current

$235.42

Pure Model

$334.00

Fair Value

$324.96

Bull Case

$432.12

Bear Case

$257.10

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

2.43%

Calibrated Growth

3.42%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $334.00.

What's Driving This Ratingfor VRSN

✓

CapEx already efficient

CapEx at 2.14% 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 73.57% 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 4.36% revenue growth, fading to 3.75% by Year 10. Revenue reaches $2.7B (vs $1.7B today).

🎯

Market pricing in lower growth than model

The market implies only 2.43% perpetual growth — 132bps 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 74.74% indicates efficient cash generation. FCF reaches $1.5B by Year 10 (56.85% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.75

Market Risk Premium4.50%

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

Cost of Equity (Re)7.89%

Cost of Debt

Pre-tax Cost of Debt4.30%

Tax Rate22.72%

After-tax Cost of Debt3.32%

Equity Weight (E/V)92.37%

Debt Weight (D/V)7.63%

WACC Calculation

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

WACC = (92.37% × 7.89%) + (7.63% × 3.32%)

= 7.54%

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	$1.7B	$2.0B	$2.2B	$2.4B	$2.7B
EBIT	$1.3B	$1.5B	$1.6B	$1.8B	$2.0B
Tax	$289M	$335M	$373M	$401M	$448M
NOPAT	$983M	$1.1B	$1.3B	$1.4B	$1.5B
+ Depreciation	$43M	$50M	$56M	$60M	$67M
- Capex	$37M	$43M	$48M	$51M	$57M
- Δ NWC	$7M	$19M	$8M	$9M	$10M
Free Cash Flow	$982M	$1.1B	$1.3B	$1.4B	$1.5B
Discount Factor	0.930	0.804	0.695	0.601	0.483
Present Value	$913M	$907M	$882M	$821M	$737M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.5B

Terminal Growth Rate3.75%

WACC7.54%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$41.7B

PV of Terminal Value$20.2B

Exit Multiple Method

Year 10 EBITDA$2.0B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$57.1B

PV of Terminal Value$27.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$8.5B

PV of Terminal Value$20.2B

Enterprise Value$28.6B

(-) Net Debt$1.5B

Equity Value$27.1B

Shares Outstanding92M

Price per Share$293.78

Exit Multiple Method

PV of Projected FCFs$8.5B

PV of Terminal Value$27.6B

Enterprise Value$36.1B

(-) Net Debt$1.5B

Equity Value$34.6B

Shares Outstanding92M

Price per Share$374.22

Pure Model Fair Value

$334.00

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%
5.54%	$442.61	$482.35	$505.40	$484.59	$464.74
6.54%	$362.85	$381.55	$406.96	$443.47	$464.74
7.54%	$310.38	$320.81	$334.00	$351.20	$374.56
8.54%	$271.78	$278.23	$286.01	$295.61	$307.75
9.54%	$241.47	$245.73	$250.72	$256.65	$263.82

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

$257.10

9.2% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 0.94

Base Case

$334.00

41.9% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 0.75

Bull Case

$432.12

83.6% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 0.64

Key Assumptions & Drivers• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.36%

Year 3 Revenue Growth10.68%

Year 5 Revenue Growth3.75%

Year 7 Revenue Growth3.75%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin73.57%

Tax Rate22.72%

Historical Capex / Rev2.14%

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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