Altair Engineering (ALTR) DCF Valuation & Fundamental Primer
Altair Engineering (ALTR) currently trades at $273.86 with an enterprise value of $43.58B. Our proprietary institutional model rates Altair Engineering at 82/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 24.9% vs. historical growth of 23.2% (Fairly Priced to Fundamentals).
Institutional fundamental teardown of Altair Engineering (ALTR) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Altair Engineering (ALTR) 3-Scenario DCF Valuation Range
Institutional Software Quality Scorecard (82/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
Elite deferred revenue float; FCF exceeds operating income by >20%
Elevated equity dilution; SBC consumes substantial operating cash flow
Elite Tier-1 SaaS compounder with high gross margin and superior Rule of 40
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 190% of EBIT driven by upfront annual collections
- Top-quartile software unit economics: 82.6% gross margin and 56.6% Rule of 40 score
- Net cash positive: $1.97B balance sheet buffer
Key Operational & Dilution Risks
- Substantial SBC dilution drag: SBC is 15.1% of revenue ($631.4M)
Reverse-DCF Solver: What Growth is Priced Into ALTR?
Market implies 24.9% annual revenue growth over next 5 years, in line with company run-rate.
Altair Engineering (ALTR) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $4.18B | $4.18B | $5.15B | $6.35B | $7.82B | $9.63B | $11.87B |
| Gross Profit | $3.45B | $3.45B | $4.26B | $5.24B | $6.46B | $7.96B | $9.80B |
| Operating Income (EBIT) | $736.0M | $736.0M | $906.7M | $1.12B | $1.38B | $1.70B | $2.09B |
| Stock-Based Compensation (SBC) | $631.4M | $631.4M | $777.9M | $958.4M | $1.18B | $1.45B | $1.79B |
| Unlevered Free Cash Flow (FCF) | $1.40B | $1.40B | $1.72B | $2.12B | $2.61B | $3.22B | $3.96B |
| SBC-Adjusted True Cash Flow | $765.3M | $765.3M | $942.8M | $1.16B | $1.43B | $1.76B | $2.17B |
Software & Cloud Services Peer Comparables Matrix
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Altair Engineering | ALTR | $48.39B | $4.18B | 82.6% | 33.4% | 56.6% | 15.1% | 11.1× |
| ServiceNow, Inc. | NOW | $192.40B | $10.98B | 79.5% | 31.5% | 54.0% | 15.8% | 17.2× |
| Workday, Inc. | WDAY | $38.74B | $2.98B | 74.9% | 20.8% | 41.1% | 17.1% | 12.5× |
| Salesforce, Inc. | CRM | $307.82B | $37.90B | 76.8% | 32.4% | 43.4% | 8.4% | 8.0× |
| Datadog, Inc. | DDOG | $45.58B | $2.68B | 81.2% | 28.5% | 55.0% | 20.4% | 16.1× |
| Snowflake Inc. | SNOW | $54.93B | $3.62B | 74.0% | 26.0% | 54.0% | 34.5% | 14.7× |
| HubSpot, Inc. | HUBS | $38.18B | $4.76B | 83.4% | 16.9% | 38.8% | 10.9% | 7.4× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 27.3% | 48.7% | 16.4% | 13.6× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 11.1× | $46.42B | $48.39B | $273.86 | 0.0% |
| -20% Multiple Compression | 8.9× | $37.13B | $39.11B | $221.32 | -20.0% |
| -35% Multiple Compression | 7.2× | $30.17B | $32.15B | $181.92 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $20.91B | $22.88B | $129.50 | -55.0% |
Frequently Asked Questions: Altair Engineering (ALTR) Valuation
What is Altair Engineering (ALTR)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Altair Engineering (ALTR) has a Base Case implied value of $257.79 per share (with a Bear Case of $111.72 and a Bull Case of $468.70), compared to its current price of $273.86. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Altair Engineering (ALTR)'s Rule of 40 score and Free Cash Flow margin?
Altair Engineering achieves a Rule of 40 score of 56.6%, combining a 23.2% revenue growth run-rate with a 33.4% TTM free cash flow margin on $4.18B in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 48.7%.
What revenue growth rate is priced into ALTR stock according to Reverse-DCF analysis?
At $273.86 per share (Enterprise Value of $46.42B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 24.9%, compared to Altair Engineering's historical CAGR of 23.2%. Overall market expectations are rated as "Fairly Priced to Fundamentals".
How does Altair Engineering compare to Software & Cloud Services software peers?
Altair Engineering (ALTR) earns an institutional Software Quality Score of 82/100 (Grade A — High-Quality Compounder). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 13.6× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact Altair Engineering (ALTR)'s valuation?
Altair Engineering recorded $631.4M in TTM stock-based compensation (15.1% of revenue). When treating SBC as a cash-equivalent compensation expense, Altair Engineering's SBC-adjusted free cash flow yield is 1.6%, scoring 10/25 on our Shareholder Dilution Friction pillar.