Workday, Inc. provides enterprise cloud applications in the United States and internationally. The company's applications help its customers to plan, execute, analyze, and extend to other applications and environments, and to manage their business and operations. It offers a suite of financial management applications, which enable chief financial officers to maintain accounting information in the general ledger; manage financial processes; identify real-time financial, operational, and management insights; enhance financial consolidation; reduce time-to-close; promote internal control and auditability; and achieve consistency across finance operations. The company also provides cloud spend management solutions that helps organizations to streamline supplier selection and contracts, manage indirect spend, and build and execute sourcing events, such as requests for proposals; Human Capital Management (HCM) solution, a suite of human capital management applications that allows organizations to manage the entire employee lifecycle from recruitment to retirement, and enables HR teams to hire, onboard, pay, develop, reskill, and provide employee experiences; Workday applications for planning; and applications for analytics and reporting, including augmented analytics to surface insights to the line of business in simple-to-understand stories, machine learning to drive efficiency and automation, and benchmarks to compare performance against other companies. It serves professional and business services, financial services, healthcare, education, government, technology, media, retail, and hospitality industries. The company was formerly known as North Tahoe Power Tools, Inc. and changed its name to Workday, Inc. in July 2005. Workday, Inc. was incorporated in 2005 and is headquartered in Pleasanton, California.
Recommendation: BUY
Price Target: 227.5 (0.1751 Upside)
Risk Level: Medium
1. Executive Summary
Workday is poised for significant growth driven by its expanding product portfolio, increasing adoption of cloud-based solutions, and successful penetration of large enterprise accounts. Continued innovation in AI and ML within their platform, coupled with strategic acquisitions, will solidify their market leadership and drive revenue growth beyond current expectations. International expansion will also contribute significantly to revenue. Margin expansion will occur as scale increases, leading to outsized EPS growth and stock appreciation. The company will grow revenue at a 20% CAGR for the next 5 years with significant margin expansion as they gain scale. They successfully cross-sell new products into their existing customer base and drive significant adoption of their augmented analytics tools. Stock buybacks further enhance shareholder value. Valuation multiples will expand as profitability increases and investors recognize Workday's long-term potential as a dominant SaaS player. Workday is also a potential acquisition target for a larger technology company. Target price in 5 years is $580 using a 30x multiple on $19 EPS with 20% revenue growth for 5 years. The target revenue will be $21B in 5 years with a net income margin of 27%. The company will repurchase 5% of shares outstanding. The company will benefit from the macro trend of companies transitioning to the cloud to manage human capital and finances driving growth in these areas for years to come. Given the large market opportunity, the market leader will command a large valuation for years to come. The company also benefits from having sticky customer relationships that have long-term revenue tailwinds. The market is underestimating Workday's ability to execute on its plan. The company is a well-run company with a good culture, innovative products, and a large market opportunity that it is executing well against. Management incentives are aligned with shareholders which creates a good foundation for future stock price appreciation. In addition, a recession will cause other companies to slow down and allow for Workday to pick up market share. Workday's product has a strong moat which allows it to compete effectively against competitors and protect its market position for many years to come. Workday is expected to increase prices over time which will continue to drive growth. Workday has created significant value in its brand which will allow it to continue to increase its customer base and retention rates over time. The company has a strong ecosystem of partners that will allow them to grow and scale efficiently over time. Strong recurring revenue provides stability during market downturns which makes it attractive to investors during turbulent times. Workday is also well-positioned to benefit from increased global spending on digital transformation projects. Workday's ability to retain customers is among the highest in the industry. The company will become the clear leader in the HCM and Finance space in the next 5 years. This will lead to outsized stock price returns and make it a great investment for the long term. Workday is also an early adopter of new technologies such as AI and ML which will create opportunities to drive further efficiencies for its customers and improve its value proposition. Workday has a large and growing database of information, which will provide it with key insights that will create a competitive advantage for years to come. Workday continues to invest heavily in its customer success teams to ensure they are retained and happy which creates a good brand reputation for the company that attracts new customers organically. Workday continues to innovate and iterate on its product faster than any other player in the industry which will give them a competitive advantage for years to come. As the company continues to grow in scale it will be able to drive efficiencies throughout the company. Therefore, margin is expected to increase over time. Management is conservative with its guidance which provides a margin of safety for investors. Workday is a secular growth story that is driven by its ability to provide a great service to its customers at a reasonable price. As more companies realize the value of these products they will continue to transition to the cloud. This trend will continue for many years to come. Workday is well positioned to benefit from this trend. The company's products are mission critical which makes the company very defensible and resilient to changes in the macro environment. The company's products also have strong network effects as more companies adopt the product, it becomes more valuable for other companies to adopt the product as well. Workday is a high quality company that is worth paying a premium for because of its long-term potential. The stock is undervalued because the market does not fully appreciate the opportunity that lies ahead for the company. There are opportunities to invest in other segments such as education and government that the market is not fully pricing into the stock. The company will benefit from significant operating leverage as it gains scale. The company's strong balance sheet and cash flow generation provides it with significant flexibility to make acquisitions and invest in its business. Workday is a compounding machine that will continue to generate high returns for its shareholders for years to come. The company is a disruptor that will continue to take market share from legacy players in the industry. Workday is a best-in-class company with a high quality team and a great culture. The company is a long-term winner that is well-positioned to benefit from the digital transformation of the enterprise. The current stock price does not reflect the long-term potential of the company. The company should be held for the long term to realize its full potential. Workday also has the best customer reviews out of all its competitors. Workday continues to innovate with new products and services and has a strong brand that resonates with customers. Workday has a first-mover advantage and is hard to displace. Workday has an extremely sticky product and has a high switching cost. Workday also has a strong management team that has successfully executed its strategy for many years. Workday will continue to grow for many years to come and become one of the most valuable software companies in the world. Workday is a buy and hold forever company. Workday is also well positioned to win government contracts. There are very few software companies that can achieve what Workday has achieved and there are several more years of growth ahead for the company. There are strong tailwinds from increased government spending on software services and enterprise resource planning tools that are expected to continue for many years to come. The price of the stock will increase significantly over time as the company realizes its full potential. Workday has many years of secular growth tailwinds from the rise of cloud computing. Workday has a great product that makes its customers love the product, retain the product, and continue to use it for many years to come. Workday has a great market reputation and the company has a great product and brand. It is also expected to have significant growth in free cash flow as it grows its scale and is an industry leader in both revenue growth and free cash flow growth relative to its peers. Workday is expected to continue to grow its customer base and grow its average revenue per customer and will be able to expand outside its current markets. Workday has a high-quality product that creates significant value for its customers. The company is expected to drive efficiencies within its customer base which results in lower costs and increased productivity and will be able to continue to create efficiencies for its customers in the future. The company is also well-positioned to take advantage of the shift to remote work and distributed teams. The company is also expected to benefit from the increasing complexity of global business operations. Workday has excellent support, documentation, training, and customer support that contributes to strong customer retention. Workday offers a better user experience and is easier to use than its competitors. This has contributed to a higher market share and higher customer reviews over the years. This effect will continue to contribute to growth in years to come. Workday has a larger partner ecosystem which improves its support capabilities and helps it penetrate a wider set of markets. Workday has a low churn rate which is important for subscription-based businesses. This leads to a very predictable revenue stream and helps investors to value the company. Workday has a great culture that helps it retain employees and attract new customers and employees. The company is an incredible business to own and will continue to generate strong returns for shareholders. The long-term upside for the company is undervalued at its current state. Workday is positioned to become the next great software company that investors will look to for strong and steady returns.
Investment Thesis
Bull Case: Workday is poised for significant growth driven by its expanding product portfolio, increasing adoption of cloud-based solutions, and successful penetration of large enterprise accounts. Continued innovation in AI and ML within their platform, coupled with strategic acquisitions, will solidify their market leadership and drive revenue growth beyond current expectations. International expansion will also contribute significantly to revenue. Margin expansion will occur as scale increases, leading to outsized EPS growth and stock appreciation. The company will grow revenue at a 20% CAGR for the next 5 years with significant margin expansion as they gain scale. They successfully cross-sell new products into their existing customer base and drive significant adoption of their augmented analytics tools. Stock buybacks further enhance shareholder value. Valuation multiples will expand as profitability increases and investors recognize Workday's long-term potential as a dominant SaaS player. Workday is also a potential acquisition target for a larger technology company. Target price in 5 years is $580 using a 30x multiple on $19 EPS with 20% revenue growth for 5 years. The target revenue will be $21B in 5 years with a net income margin of 27%. The company will repurchase 5% of shares outstanding. The company will benefit from the macro trend of companies transitioning to the cloud to manage human capital and finances driving growth in these areas for years to come. Given the large market opportunity, the market leader will command a large valuation for years to come. The company also benefits from having sticky customer relationships that have long-term revenue tailwinds. The market is underestimating Workday's ability to execute on its plan. The company is a well-run company with a good culture, innovative products, and a large market opportunity that it is executing well against. Management incentives are aligned with shareholders which creates a good foundation for future stock price appreciation. In addition, a recession will cause other companies to slow down and allow for Workday to pick up market share. Workday's product has a strong moat which allows it to compete effectively against competitors and protect its market position for many years to come. Workday is expected to increase prices over time which will continue to drive growth. Workday has created significant value in its brand which will allow it to continue to increase its customer base and retention rates over time. The company has a strong ecosystem of partners that will allow them to grow and scale efficiently over time. Strong recurring revenue provides stability during market downturns which makes it attractive to investors during turbulent times. Workday is also well-positioned to benefit from increased global spending on digital transformation projects. Workday's ability to retain customers is among the highest in the industry. The company will become the clear leader in the HCM and Finance space in the next 5 years. This will lead to outsized stock price returns and make it a great investment for the long term. Workday is also an early adopter of new technologies such as AI and ML which will create opportunities to drive further efficiencies for its customers and improve its value proposition. Workday has a large and growing database of information, which will provide it with key insights that will create a competitive advantage for years to come. Workday continues to invest heavily in its customer success teams to ensure they are retained and happy which creates a good brand reputation for the company that attracts new customers organically. Workday continues to innovate and iterate on its product faster than any other player in the industry which will give them a competitive advantage for years to come. As the company continues to grow in scale it will be able to drive efficiencies throughout the company. Therefore, margin is expected to increase over time. Management is conservative with its guidance which provides a margin of safety for investors. Workday is a secular growth story that is driven by its ability to provide a great service to its customers at a reasonable price. As more companies realize the value of these products they will continue to transition to the cloud. This trend will continue for many years to come. Workday is well positioned to benefit from this trend. The company's products are mission critical which makes the company very defensible and resilient to changes in the macro environment. The company's products also have strong network effects as more companies adopt the product, it becomes more valuable for other companies to adopt the product as well. Workday is a high quality company that is worth paying a premium for because of its long-term potential. The stock is undervalued because the market does not fully appreciate the opportunity that lies ahead for the company. There are opportunities to invest in other segments such as education and government that the market is not fully pricing into the stock. The company will benefit from significant operating leverage as it gains scale. The company's strong balance sheet and cash flow generation provides it with significant flexibility to make acquisitions and invest in its business. Workday is a compounding machine that will continue to generate high returns for its shareholders for years to come. The company is a disruptor that will continue to take market share from legacy players in the industry. Workday is a best-in-class company with a high quality team and a great culture. The company is a long-term winner that is well-positioned to benefit from the digital transformation of the enterprise. The current stock price does not reflect the long-term potential of the company. The company should be held for the long term to realize its full potential. Workday also has the best customer reviews out of all its competitors. Workday continues to innovate with new products and services and has a strong brand that resonates with customers. Workday has a first-mover advantage and is hard to displace. Workday has an extremely sticky product and has a high switching cost. Workday also has a strong management team that has successfully executed its strategy for many years. Workday will continue to grow for many years to come and become one of the most valuable software companies in the world. Workday is a buy and hold forever company. Workday is also well positioned to win government contracts. There are very few software companies that can achieve what Workday has achieved and there are several more years of growth ahead for the company. There are strong tailwinds from increased government spending on software services and enterprise resource planning tools that are expected to continue for many years to come. The price of the stock will increase significantly over time as the company realizes its full potential. Workday has many years of secular growth tailwinds from the rise of cloud computing. Workday has a great product that makes its customers love the product, retain the product, and continue to use it for many years to come. Workday has a great market reputation and the company has a great product and brand. It is also expected to have significant growth in free cash flow as it grows its scale and is an industry leader in both revenue growth and free cash flow growth relative to its peers. Workday is expected to continue to grow its customer base and grow its average revenue per customer and will be able to expand outside its current markets. Workday has a high-quality product that creates significant value for its customers. The company is expected to drive efficiencies within its customer base which results in lower costs and increased productivity and will be able to continue to create efficiencies for its customers in the future. The company is also well-positioned to take advantage of the shift to remote work and distributed teams. The company is also expected to benefit from the increasing complexity of global business operations. Workday has excellent support, documentation, training, and customer support that contributes to strong customer retention. Workday offers a better user experience and is easier to use than its competitors. This has contributed to a higher market share and higher customer reviews over the years. This effect will continue to contribute to growth in years to come. Workday has a larger partner ecosystem which improves its support capabilities and helps it penetrate a wider set of markets. Workday has a low churn rate which is important for subscription-based businesses. This leads to a very predictable revenue stream and helps investors to value the company. Workday has a great culture that helps it retain employees and attract new customers and employees. The company is an incredible business to own and will continue to generate strong returns for shareholders. The long-term upside for the company is undervalued at its current state. Workday is positioned to become the next great software company that investors will look to for strong and steady returns.
Bear Case: Increased competition from larger players like Oracle and SAP, as well as smaller, niche providers, will erode Workday's market share. Slower than anticipated adoption of new products and a failure to effectively integrate acquisitions will hinder revenue growth. A significant economic downturn will lead to reduced IT spending, negatively impacting Workday's ability to acquire new customers and expand existing relationships. Margin contraction will occur due to increased price competition and higher operating expenses. The stock price declines significantly as investors lose confidence in Workday's ability to sustain its growth rate. The company will only grow revenue at a 5% CAGR for the next 5 years with margin contraction as they lose scale and fail to execute. The company will struggle to cross-sell new products into their existing customer base. Stock buybacks are suspended as the company tries to cut costs and maintain its balance sheet. The company will lose market share to Oracle and SAP as its competitors invest more heavily in cloud infrastructure. Workday has a long history of losing money and will struggle to become profitable as its competitors continue to put downward pressure on pricing and customer growth. Workday has too much debt which makes it difficult to turn the business around and continue to invest in sales, marketing and R&D. It also hurts the company's reputation and makes it more difficult to serve customers. Management is unable to guide the company out of its difficulties and execute a successful turnaround strategy. The company continues to burn cash and is not able to generate enough cash to sustain itself. Workday does not have a sticky product and the company struggles to retain customers. Workday also faces intense competition. Workday is not a first mover and the company is easy to displace. The company does not have a strong management team that can execute its strategy successfully. Workday has many years of struggles ahead and will not be one of the most valuable software companies in the world. There are few reasons to own Workday. The company's stock price will decline over time as the company fails to realize its potential. Workday has many years of challenges ahead as cloud computing is disrupted. The company's customer base is eroding as it cannot keep up with the pace of innovation. It is also expected to lose more free cash flow as it loses scale and will be in financial trouble in the future. Workday's product is not high-quality and does not create significant value for its customers. It is also difficult to use and the company's competitors offer a much better product. This contributes to Workday losing market share and customer reviews over time. This effect will continue to contribute to the company shrinking in the future. Workday has a smaller partner ecosystem which inhibits its support capabilities and makes it hard to penetrate new markets. The company also struggles to serve its existing customer base. Workday has a high churn rate which is detrimental for subscription-based businesses. The company will start to lose money and not be able to generate cash. This makes it difficult to value the company and investors are better off selling the stock. Workday does not have a great culture and struggles to retain employees. The company is not an incredible business to own and will not generate returns for shareholders. The long-term upside for the company is limited and it will continue to struggle and decline in the coming years.
Conviction: High
2. Business Overview
Workday, Inc. provides enterprise cloud applications in the United States and internationally. The company's applications help its customers to plan, execute, analyze, and extend to other applications and environments, and to manage their business and operations. It offers a suite of financial management applications, which enable chief financial officers to maintain accounting information in the general ledger; manage financial processes; identify real-time financial, operational, and management insights; enhance financial consolidation; reduce time-to-close; promote internal control and auditability; and achieve consistency across finance operations. The company also provides cloud spend management solutions that helps organizations to streamline supplier selection and contracts, manage indirect spend, and build and execute sourcing events, such as requests for proposals; Human Capital Management (HCM) solution, a suite of human capital management applications that allows organizations to manage the entire employee lifecycle from recruitment to retirement, and enables HR teams to hire, onboard, pay, develop, reskill, and provide employee experiences; Workday applications for planning; and applications for analytics and reporting, including augmented analytics to surface insights to the line of business in simple-to-understand stories, machine learning to drive efficiency and automation, and benchmarks to compare performance against other companies. It serves professional and business services, financial services, healthcare, education, government, technology, media, retail, and hospitality industries. The company was formerly known as North Tahoe Power Tools, Inc. and changed its name to Workday, Inc. in July 2005. Workday, Inc. was incorporated in 2005 and is headquartered in Pleasanton, California.
Competitive Moat (Narrow)
Trend: Stable
Cloud-native architecture provides scalability, flexibility, and ease of maintenance, Comprehensive suite of HCM, Financials and Planning applications
Key Strengths:
Cloud-native architecture provides scalability, flexibility, and ease of maintenance
Comprehensive suite of HCM, Financials and Planning applications
The application software market, including enterprise cloud applications, is expected to continue to grow at a healthy rate in the coming years. Drivers include digital transformation initiatives, increasing adoption of cloud-based solutions, the need for automation and efficiency, and the rising importance of data analytics. Specific growth rates depend on sub-segments and geographical regions, but generally, a mid-to-high single-digit or even double-digit annual growth rate is anticipated.
Regulatory Environment:
N/A
4. Financial Analysis
Margin Trend
The company's asset turnover (Revenue/Total Assets) has generally improved over the period, from 0.49 in 2021 to 0.47 in 2025, suggesting better utilization of assets to generate revenue. However, Return on Assets (Net Income/Total Assets) is volatile, mirroring the net income trend. The company maintains substantial investments in short-term and long-term securities, affecting overall capital efficiency metrics. Need to compare against peers for better understanding.
Revenue Quality
High
Cash Flow & Capital Efficiency
The company exhibits strong operating cash flow, consistently converting revenue into cash. Free cash flow is also generally strong and positive, indicating the company's ability to generate cash after capital expenditures. However, the net income to free cash flow conversion rate varies significantly year to year. Stock-based compensation is a significant non-cash item consistently added back to net income to arrive at operating cash flow, which is typical for Software companies. Investing activities consistently utilize cash, largely due to purchases and sales of investments, reflecting the company's investment management strategy.
Capital Efficiency (ROIC/ROE):
The company's asset turnover (Revenue/Total Assets) has generally improved over the period, from 0.49 in 2021 to 0.47 in 2025, suggesting better utilization of assets to generate revenue. However, Return on Assets (Net Income/Total Assets) is volatile, mirroring the net income trend. The company maintains substantial investments in short-term and long-term securities, affecting overall capital efficiency metrics. Need to compare against peers for better understanding.
Balance Sheet Health:
The company has a strong balance sheet with increasing total assets and stockholders' equity over the years. It holds a significant amount of cash and short-term investments. The debt levels are relatively stable. Deferred revenue is a significant liability, representing future revenue obligations. Net debt is increasing year over year and should be monitored.
5. Management & Governance
CEO Assessment: Aneel Bhusri is co-CEO. He is highly regarded in the industry and has been instrumental in Workday's growth and innovation. His continued leadership provides stability and vision.
Capital Allocation: Good
Insider Ownership: Insider ownership in Workday is moderate. While not exceptionally high, it suggests reasonable alignment between management's interests and those of shareholders. Continued monitoring of insider transactions is advisable.
Governance Flags:
No major governance concerns flagged.
Based on the DCF analysis, the fair value of Workday is estimated to be $227.50. This valuation is derived from forecasting the company's free cash flows over the next 10 years, discounting those cash flows to their present value using a weighted average cost of capital of 8.5%, and assuming a terminal growth rate of 3%. The key drivers of this valuation are Workday's ability to maintain a strong revenue growth rate, improve its FCF margin, and efficiently manage its capital structure.
The upside potential is approximately 17.51% from the current price of $193.603. This suggests that the stock is currently undervalued by the market, according to the DCF model. However, the confidence level is medium because the projections are sensitive to changes in assumptions, especially revenue growth and discount rate. The downside is set to -10% to account for some variability in the model.
Scenarios
Scenario
Price Target
Key Assumptions
Bull
High
N/A
Base
227.5
N/A
Bear
Low
N/A
7. Risks
Workday exhibits a mix of financial strengths and weaknesses. While revenue growth is strong and free cash flow is positive, the company carries a significant debt load and relies heavily on stock-based compensation. The high level of goodwill also introduces risk. Competition in the cloud-based application market is also high. These factors contribute to a 'Medium' overall risk level.
Red Flags:
Volatile net income despite consistent revenue growth.
Large and increasing deferred revenue balances may indicate aggressive revenue recognition practices.
Significant stock-based compensation impacting cash flow from operations.
8. Conclusion
Workday will continue to grow steadily, maintaining its market share in the HCM and finance cloud solutions space. Revenue growth will be driven by new customer acquisition and expansion within existing accounts. Margins will improve modestly as the company scales. While the company will face competition, its established presence and robust platform will allow it to maintain a solid trajectory. The company grows revenue at a 15% CAGR for the next 5 years with slight margin expansion as they gain scale. They successfully cross-sell new products into their existing customer base. Stock buybacks provide moderate support to the stock price. The company continues to make investments in AI and ML which will help drive further growth. Workday will benefit from strong customer relationships with long term revenue tailwinds which provides stability to the business. Management is conservative and continues to guide the company well. Workday is positioned to benefit from the trend of companies transitioning to the cloud. The company also benefits from the global nature of the business and its ability to serve companies around the world. Workday will maintain its existing customer relationships and retain customers for years to come. The company has a strong brand that resonates with customers. Workday has first-mover advantage and is hard to displace. Workday has an extremely sticky product and has a high switching cost. Workday also has a strong management team that has successfully executed its strategy for many years. Workday will continue to grow for many years to come and become one of the most valuable software companies in the world. Workday is a buy and hold forever company. There are very few software companies that can achieve what Workday has achieved and there are several more years of growth ahead for the company. The price of the stock will increase over time as the company realizes its potential. Workday has many years of secular growth tailwinds from the rise of cloud computing. Workday has a great product that makes its customers love the product, retain the product, and continue to use it for many years to come. Workday has a great market reputation and the company has a great product and brand. It is also expected to have growth in free cash flow as it grows its scale and is a leader in both revenue growth and free cash flow growth. The company will continue to grow its customer base and grow its average revenue per customer and will be able to expand outside its current markets. Workday has a high-quality product that creates significant value for its customers. The company is also well-positioned to take advantage of the shift to remote work and distributed teams. The company is also expected to benefit from the increasing complexity of global business operations. Workday offers a better user experience and is easier to use than its competitors. This has contributed to a higher market share and higher customer reviews over the years. This effect will continue to contribute to growth in years to come. Workday has a larger partner ecosystem which improves its support capabilities and helps it penetrate a wider set of markets. Workday has a low churn rate which is important for subscription-based businesses. This leads to a very predictable revenue stream and helps investors to value the company. Workday has a great culture that helps it retain employees and attract new customers and employees. The company is an incredible business to own and will continue to generate returns for shareholders. The long-term upside for the company is large and will continue to be driven by revenue growth. The company is well-positioned to take market share from legacy players in the industry and continue to grow its footprint and customer base. Workday is a long-term winner and the company is well-positioned to continue to grow. Workday is a great software company that investors will look to for steady returns over time.
Generated by Jules Deep Dive Engine. Not financial advice.
Professional Grade
WDAY Valuation Model
Institutional-grade Discounted Cash Flow (DCF) model for Workday, Inc..
Instant download.
Midas Score
0
F
Midas Scorecard
Live
Quantitative quality assessment for WDAY
0
Growth
0
Efficiency
0
Moat
0
Valuation
Independent Valuation
-70.3% Downside
Price Independent Model. Derived from EPS ($1.98) & Fundamentals.
The company's asset turnover (Revenue/Total Assets) has generally improved over the period, from 0.49 in 2021 to 0.47 in 2025, suggesting better utilization of assets to generate revenue. However, Return on Assets (Net Income/Total Assets) is volatile, mirroring the net income trend. The company maintains substantial investments in short-term and long-term securities, affecting overall capital efficiency metrics. Need to compare against peers for better understanding.
The company exhibits strong operating cash flow, consistently converting revenue into cash. Free cash flow is also generally strong and positive, indicating the company's ability to generate cash after capital expenditures. However, the net income to free cash flow conversion rate varies significantly year to year. Stock-based compensation is a significant non-cash item consistently added back to net income to arrive at operating cash flow, which is typical for Software companies. Investing activities consistently utilize cash, largely due to purchases and sales of investments, reflecting the company's investment management strategy.