Workday, Inc.WDAYNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $234.22 per share(market-calibrated)

+63.1%

Upside to Fair Value

Current

$143.61

Pure Model

$236.36

Fair Value

$234.22

Bull Case

$314.17

Bear Case

$172.84

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

3.03%

Calibrated Growth

3.50%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $236.36.

What's Driving This Ratingfor WDAY

✓

CapEx already efficient

CapEx at 2.73% 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 24.12% 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 -0.08% revenue growth, fading to 3.75% by Year 10. Revenue reaches $21.8B (vs $9.6B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $154.97/share (17.5x terminal FCF) while exit multiple gives $317.74/share (46.5x 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 3.03% is close to the model's 3.75% (only 72bps 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 60.17% indicates efficient cash generation. FCF reaches $3.7B by Year 10 (16.96% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.17

Market Risk Premium4.50%

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

Cost of Equity (Re)9.75%

Cost of Debt

Pre-tax Cost of Debt8.32%

Tax Rate30.00%

After-tax Cost of Debt5.82%

Equity Weight (E/V)97.83%

Debt Weight (D/V)2.17%

WACC Calculation

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

WACC = (97.83% × 9.75%) + (2.17% × 5.82%)

= 9.67%

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	$9.5B	$11.9B	$14.9B	$18.4B	$21.8B
EBIT	$2.3B	$2.9B	$3.6B	$4.5B	$5.4B
Tax	$691M	$860M	$1.1B	$1.3B	$1.6B
NOPAT	$1.6B	$2.0B	$2.5B	$3.1B	$3.8B
+ Depreciation	$332M	$414M	$520M	$640M	$757M
- Capex	$261M	$325M	$408M	$502M	$594M
- Δ NWC	-$2M	$365M	$551M	$497M	$236M
Free Cash Flow	$1.7B	$1.7B	$2.1B	$2.8B	$3.7B
Discount Factor	0.912	0.758	0.630	0.524	0.397
Present Value	$1.5B	$1.3B	$1.3B	$1.5B	$1.5B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.7B

Terminal Growth Rate3.75%

WACC9.67%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$64.7B

PV of Terminal Value$25.7B

Exit Multiple Method

Year 10 EBITDA$6.1B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$171.7B

PV of Terminal Value$68.3B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$14.1B

PV of Terminal Value$25.7B

Enterprise Value$39.8B

(-) Net Debt-$667M

Equity Value$40.5B

Shares Outstanding261M

Price per Share$154.97

Exit Multiple Method

PV of Projected FCFs$14.1B

PV of Terminal Value$68.3B

Enterprise Value$82.4B

(-) Net Debt-$667M

Equity Value$83.0B

Shares Outstanding261M

Price per Share$317.74

Pure Model Fair Value

$236.36

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%
7.67%	$289.96	$298.33	$308.83	$322.41	$340.64
8.67%	$255.94	$261.15	$267.43	$275.13	$284.79
9.67%	$228.83	$232.30	$236.36	$241.16	$246.94
10.67%	$206.42	$208.84	$211.60	$214.80	$218.54
11.67%	$187.43	$189.17	$191.14	$193.36	$195.91

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

$172.84

20.4% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.46

Base Case

$236.36

64.6% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.17

Bull Case

$314.17

118.8% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 0.99

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-0.08%

Year 3 Revenue Growth11.41%

Year 5 Revenue Growth14.03%

Year 7 Revenue Growth9.92%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin24.12%

Terminal EBIT Margin25.00%

Tax Rate30.00%

Historical Capex / Rev2.73%

NWC / Revenue30.00%

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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