Credo Technology Group Holding Ltd (CRDO) DCF Valuation & Fundamental Primer
Credo Technology Group Holding Ltd (CRDO) currently trades at $140.24 with an enterprise value of $25.50B. Our proprietary institutional model rates Credo Technology Group Holding Ltd at 86/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 12.2% vs. historical growth of 16.0% (Fairly Priced to Fundamentals).
Institutional fundamental teardown of Credo Technology Group Holding Ltd (CRDO) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Credo Technology Group Holding Ltd (CRDO) 3-Scenario DCF Valuation Range
Stress-test CRDO's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $140.24).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $177.95 +27% | $188.40 +34% | $200.59 +43% | $215.00 +53% | $232.29 +66% |
| 9.3% | $160.94 +15% | $169.17 +21% | $178.63 +27% | $189.59 +35% | $202.46 +44% |
| 10.0% | $146.96 +5% | $153.58 +10% | $161.08 +15% | $169.65 +21% | $179.55 +28% |
| 10.8% | $135.27 -4% | $140.68 +0% | $146.75 +5% | $153.60 +10% | $161.39 +15% |
| 11.5% | $125.35 -11% | $129.84 -7% | $134.82 -4% | $140.40 +0% | $146.67 +5% |
Institutional Software Quality Scorecard (86/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
Elite deferred revenue float; FCF exceeds operating income by >20%
Standard software SBC dilution; modest equity transfer to employees
High-quality software margins with healthy balanced growth and profitability
Zero-debt fortress balance sheet with abundant net cash liquidity
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 242% of EBIT driven by upfront annual collections
- Healthy unit economics: 75.5% gross margin
- Fortress capital structure: Zero debt and $2.11B in pure net cash
Key Operational & Dilution Risks
Reverse-DCF Solver: What Growth is Priced Into CRDO?
Market implies 12.2% annual revenue growth over next 5 years (22.9% dilution-adjusted), in line with company run-rate.
Headline Reverse-DCF ignores Stock-Based Compensation (14.3% of revenue) and annual share dilution (1.8%/yr). Accounting for both requires 22.9% 5-year revenue CAGR to justify $140.24/sh on a true per-share economic cash flow basis.
Credo Technology Group Holding Ltd (CRDO) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $4.07B | $4.07B | $4.73B | $5.48B | $6.36B | $7.38B | $8.56B |
| Gross Profit | $3.08B | $3.08B | $3.57B | $4.14B | $4.80B | $5.57B | $6.46B |
| Operating Income (EBIT) | $444.2M | $444.2M | $515.2M | $597.7M | $693.3M | $804.2M | $932.9M |
| Stock-Based Compensation (SBC) | $582.7M | $582.7M | $675.9M | $784.1M | $909.5M | $1.06B | $1.22B |
| Unlevered Free Cash Flow (FCF) | $1.08B | $1.08B | $1.25B | $1.45B | $1.68B | $1.95B | $2.26B |
| SBC-Adjusted True Cash Flow | $493.1M | $493.1M | $571.9M | $663.5M | $769.6M | $892.7M | $1.04B |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -28.8 + 0.79 × (Rule of 40) · R² = 82%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Credo Technology Group Holding Ltd | CRDO | $24.04B | $4.07B | 75.5% | 26.4% | 42.4% | 14.3% | 5.4× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 5.4× | $21.93B | $24.04B | $140.24 | 0.0% |
| -20% Multiple Compression | 4.3× | $17.54B | $19.66B | $114.66 | -20.0% |
| -35% Multiple Compression | 3.5× | $14.25B | $16.37B | $95.47 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $20.37B | $22.49B | $131.18 | -7.1% |
Frequently Asked Questions: Credo Technology Group Holding Ltd (CRDO) Valuation
What is Credo Technology Group Holding Ltd (CRDO)'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, Credo Technology Group Holding Ltd (CRDO) has a Base Case implied value of $161.08 per share (with a Bear Case of $81.64 and a Bull Case of $265.59), compared to its current price of $140.24. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Credo Technology Group Holding Ltd (CRDO)'s Rule of 40 score and Free Cash Flow margin?
Credo Technology Group Holding Ltd achieves a Rule of 40 score of 42.4%, combining a 16.0% revenue growth run-rate with a 26.4% TTM free cash flow margin on $4.07B in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into CRDO stock according to Reverse-DCF analysis?
At $140.24 per share (Enterprise Value of $21.93B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 12.2%, compared to Credo Technology Group Holding Ltd's historical CAGR of 16.0%. Overall market expectations are rated as "Fairly Priced to Fundamentals".
How does Credo Technology Group Holding Ltd compare to Software & Cloud Services software peers?
Credo Technology Group Holding Ltd (CRDO) earns an institutional Software Quality Score of 86/100 (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 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact Credo Technology Group Holding Ltd (CRDO)'s valuation?
Credo Technology Group Holding Ltd recorded $582.7M in TTM stock-based compensation (14.3% of revenue). When treating SBC as a cash-equivalent compensation expense, Credo Technology Group Holding Ltd's SBC-adjusted free cash flow yield is 2.1%, scoring 16/25 on our Shareholder Dilution Friction pillar.