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.