Research HubSoftware & Cloud ServicesESCO Technologies Inc. (ESE)

Coverage:KVYO DDOG CRWD NOW SNOW PLTR ADBE CRM PANW NET SHOP MDB

SEC 10-K / 10-Q Equity ResearchSoftware & Cloud ServicesTicker: ESE

ESCO Technologies Inc. (ESE) DCF Valuation & Fundamental Primer

ESCO Technologies Inc. (ESE) currently trades at $201.56 with an enterprise value of $6.89B. Our proprietary institutional model rates ESCO Technologies Inc. at 83/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 7.8% vs. historical growth of 15.9% (Substantial Margin of Safety).

GDA Quality Score

A83/100

High-Quality Compounder

Share Price / DCF Base

$201.56 / $275.68

Enterprise Value

$4.98B

TTM Revenue

$1.13B (+15.9%)

Gross Margin

73.9%

Rule of 40 Score

41.7%

EV / TTM Revenue

4.4×

Structural Moat: Enterprise Software & Cloud Services Switching Costs & Recurring Workflow Integration

Key Growth Catalyst: AI workflow automation, multi-module expansion across enterprise cohorts, and operating margin leverage at ESCO Technologies Inc..

Institutional fundamental teardown of ESCO Technologies Inc. (ESE) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.

Seed ESE in Interactive 3-Statement Model

Section 1 · Intrinsic Valuation Engine

ESCO Technologies Inc. (ESE) 3-Scenario DCF Valuation Range

WACC: 10.0% · Terminal Growth: 2.5% · Diluted Shares: 25.8M

bear Case DCFSensitivity

$133.37

Implied Equity Value:$3.44B

vs Current ($201.56):-33.8%

base Case DCFPrimary Benchmark

$275.68

Implied Equity Value:$7.12B

vs Current ($201.56):+36.8%

bull Case DCFSensitivity

$462.74

Implied Equity Value:$11.94B

vs Current ($201.56):+129.6%

Interactive What-If DCF SandboxSim Rule of 40: 41.7%

Stress-test ESE's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.

Seed Custom Drivers in /model

1-Click Regimes:

5Y Revenue CAGR15.9%

2%Hist: 15.9%50%

Target FCF Margin25.8%

5%Base: 25.8%45%

WACC Discount Rate10.0%

6.5%Base: 10%14.5%

Terminal Growth (g)2.5%

1.0%Implies 13.7× Y5 FCF4.0%

Accounting Lens:

Simulated Implied Price$275.68

Spread vs Market+36.8%

Simulated EV$6.89B

Effective FCF Margin25.8%

Simulated 5-Year Cash Flow Trajectory (Unlevered FCF vs. Discounted PV)Cumulative 5Y PV: $1.71B

Year 1$1.31B

FCF:$338.2M

PV:$307.4M

Year 2$1.52B

FCF:$392.0M

PV:$323.9M

Year 3$1.76B

FCF:$454.3M

PV:$341.3M

Year 4$2.04B

FCF:$526.5M

PV:$359.6M

Year 5$2.37B

FCF:$610.2M

PV:$378.9M

Enterprise Value Composition Bridge$6.89B

Split between 5-Year Explicit Cash Flows and Discounted Terminal Value

5Y Explicit PV: $1.71B (24.8%)Terminal PV: $5.18B (75.2%)

(+) Balance Sheet Cash & Equivalents+$508.9M

(−) Total Debt Obligations−$282.7M

(=) Implied Equity Value (25.8M shs)$7.12B

2D Institutional Valuation Sensitivity Heatmap

Implied share price & upside/downside spread across 25 valuation states (Current Price: $201.56).

WACC \ Terminal	1.5%	2.0%	2.5%	3.0%	3.5%
8.5%	$305.94 +52%	$324.69 +61%	$346.56 +72%	$372.41 +85%	$403.43 +100%
9.3%	$275.44 +37%	$290.20 +44%	$307.16 +52%	$326.83 +62%	$349.92 +74%
10.0%	$250.35 +24%	$262.23 +30%	$275.68 +37%	$291.06 +44%	$308.81 +53%
10.8%	$229.38 +14%	$239.09 +19%	$249.97 +24%	$262.26 +30%	$276.25 +37%
11.5%	$211.59 +5%	$219.64 +9%	$228.58 +13%	$238.58 +18%	$249.83 +24%

Section 2 · Fundamental Underwriting

Institutional Software Quality Scorecard (83/100 · Grade A)

High-Quality Compounder

Strong fundamentals, above-average cash generation, and robust competitive positioning.

Cash Conversion25 / 25

Actual: 277% of EBITTarget: Target: ≥100%

Elite deferred revenue float; FCF exceeds operating income by >20%

Dilution Friction16 / 25

Actual: 14.1% of RevTarget: Target: ≤8%

Standard software SBC dilution; modest equity transfer to employees

Unit Economics20 / 25

Actual: 74% GM / R40: 42%Target: Target: ≥75% GM / ≥40% R40

High-quality software margins with healthy balanced growth and profitability

Balance Sheet22 / 25

Actual: +$226.2M Net CashTarget: Target: Net Cash > 0

Positive net cash cushion; self-funding operations with zero insolvency risk

Core Investment Strengths & Moats

High-grade cash conversion: FCF is 277% of EBIT driven by upfront annual collections
Healthy unit economics: 73.9% gross margin
Net cash positive: $226.2M balance sheet buffer

Key Operational & Dilution Risks

Section 3 · Expectations Investing

Reverse-DCF Solver: What Growth is Priced Into ESE?

Substantial Margin of Safety

The current share price only requires 7.8% 5-year CAGR (18.1% dilution-adjusted), well below historical growth of 15.9%. If the company maintains baseline execution, there is asymmetric upside.

Implied 5-Year Revenue CAGR

7.8%

Required to justify $4.98B EV

Historical Run-Rate CAGR

15.9%

Audited multi-year top-line trajectory

Growth Hurdle Spread

-8.1%

Implied hurdle minus historical growth

Implied FCF Margin @ Hist. Growth

18.6%

Steady-state FCF margin needed at current CAGR

Institutional Dilution-Adjusted Hurdle Lens

Headline Reverse-DCF ignores Stock-Based Compensation (14.1% of revenue) and annual share dilution (1.8%/yr). Accounting for both requires 18.1% 5-year revenue CAGR to justify $201.56/sh on a true per-share economic cash flow basis.

True Economic Hurdle18.1%

SBC & Dilution Hurdle Tax+10.4% / yr

Section 4 · 5-Year Forecast Schedule

ESCO Technologies Inc. (ESE) 5-Year Fundamental Forecast

Customize in Live Engine

Statement Line Item	TTM Audited Base	TTM	Y1	Y2	Y3	Y4	Y5
Revenue	$1.13B	$1.13B	$1.31B	$1.52B	$1.76B	$2.04B	$2.37B
Gross Profit	$835.8M	$835.8M	$968.7M	$1.12B	$1.30B	$1.51B	$1.75B
Operating Income (EBIT)	$105.2M	$105.2M	$121.9M	$141.3M	$163.8M	$189.8M	$220.0M
Stock-Based Compensation (SBC)	$159.5M	$159.5M	$184.8M	$214.2M	$248.3M	$287.7M	$333.5M
Unlevered Free Cash Flow (FCF)	$291.8M	$291.8M	$338.2M	$392.0M	$454.3M	$526.5M	$610.2M
SBC-Adjusted True Cash Flow	$132.3M	$132.3M	$153.4M	$177.7M	$206.0M	$238.8M	$276.7M

Section 5 · Relative Valuation Multiples & Regression

Software & Cloud Services Peer Comparables & Rule of 40 Regression

Click any peer node or ticker to open its dedicated equity research report

Rule of 40 vs. EV / Revenue Multiple Regression

OLS Fit: EV/Rev = -29.4 + 0.80 × (Rule of 40) · R² = 83%

Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.

ESE Actual vs. Reg. Multiple4.4× vs 4.1× fair

Reg.-Implied Share Price$186.40 (+8.5% Premium)

ESEESCO Technologies Inc.·Rule of 40: 41.7%·Actual EV/Rev: 4.4×·Regression Fair Multiple: 4.1×

+8.5% Above Trendline (Premium)Open ESE Report

Company	Ticker	Market Cap	TTM Revenue	Gross Margin	FCF Margin	Rule of 40	SBC % Rev	EV / Rev
ESCO Technologies Inc.	ESE	$5.20B	$1.13B	73.9%	25.8%	41.7%	14.1%	4.4×
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×

Section 6 · Downside Protection & Multiple Sensitivity

EV / Revenue Multiple Compression Stress Test

Multiple Scenario	EV / Revenue	Implied Enterprise Value	Implied Equity Value	Implied Share Price	Delta vs Current
Current Multiple	4.4×	$4.98B	$5.20B	$201.56	0.0%
-20% Multiple Compression	3.5×	$3.98B	$4.21B	$163.00	-20.0%
-35% Multiple Compression	2.9×	$3.23B	$3.46B	$134.08	-35.0%
Software Baseline Floor (5.0× EV/Rev)	5.0×	$5.65B	$5.88B	$227.85	+13.6%

Section 7 · Investor Diligence FAQ

Frequently Asked Questions: ESCO Technologies Inc. (ESE) Valuation

What is ESCO Technologies Inc. (ESE)'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, ESCO Technologies Inc. (ESE) has a Base Case implied value of $275.68 per share (with a Bear Case of $133.37 and a Bull Case of $462.74), compared to its current price of $201.56. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.

What is ESCO Technologies Inc. (ESE)'s Rule of 40 score and Free Cash Flow margin?

ESCO Technologies Inc. achieves a Rule of 40 score of 41.7%, combining a 15.9% revenue growth run-rate with a 25.8% TTM free cash flow margin on $1.13B 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 ESE stock according to Reverse-DCF analysis?

At $201.56 per share (Enterprise Value of $4.98B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 7.8%, compared to ESCO Technologies Inc.'s historical CAGR of 15.9%. Overall market expectations are rated as "Substantial Margin of Safety".

How does ESCO Technologies Inc. compare to Software & Cloud Services software peers?

ESCO Technologies Inc. (ESE) earns an institutional Software Quality Score of 83/100 (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 ESCO Technologies Inc. (ESE)'s valuation?

ESCO Technologies Inc. recorded $159.5M in TTM stock-based compensation (14.1% of revenue). When treating SBC as a cash-equivalent compensation expense, ESCO Technologies Inc.'s SBC-adjusted free cash flow yield is 2.5%, scoring 16/25 on our Shareholder Dilution Friction pillar.

ESCO Technologies Inc. (ESE) DCF Valuation & Fundamental Primer

WACC \ Terminal

1.5%

2.0%

2.5%

3.0%

3.5%

8.5%

$305.94

+52%

$324.69

+61%

$346.56

+72%

$372.41

+85%

$403.43

+100%

9.3%

$275.44

+37%

$290.20

+44%

$307.16

+52%

$326.83

+62%

$349.92

+74%

10.0%

$250.35

+24%

$262.23

+30%

$275.68

+37%

$291.06

+44%

$308.81

+53%

10.8%

$229.38

+14%

$239.09

+19%

$249.97

+24%

$262.26

+30%

$276.25

+37%

11.5%

$211.59

+5%

$219.64

+9%

$228.58

+13%

$238.58

+18%

$249.83

+24%

Statement Line Item

TTM Audited Base

TTM

Revenue

$1.13B

$1.31B

$1.52B

$1.76B

$2.04B

$2.37B

Gross Profit

$835.8M

$968.7M

$1.12B

$1.30B

$1.51B

$1.75B

Operating Income (EBIT)

$105.2M

$121.9M

$141.3M

$163.8M

$189.8M

$220.0M

Stock-Based Compensation (SBC)

$159.5M

$184.8M

$214.2M

$248.3M

$287.7M

$333.5M

Unlevered Free Cash Flow (FCF)

$291.8M

$338.2M

$392.0M

$454.3M

$526.5M

$610.2M

SBC-Adjusted True Cash Flow

$132.3M

$153.4M

$177.7M

$206.0M

$238.8M

$276.7M

Company

Ticker

Market Cap

TTM Revenue

Gross Margin

FCF Margin

Rule of 40

SBC % Rev

EV / Rev

ESCO Technologies Inc.

ESE

$5.20B

$1.13B

73.9%

25.8%

41.7%

14.1%

4.4×

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×

Multiple Scenario

EV / Revenue

Implied Enterprise Value

Implied Equity Value

Implied Share Price

Delta vs Current

Current Multiple

4.4×

$4.98B

$5.20B

$201.56

0.0%

-20% Multiple Compression

3.5×

$3.98B

$4.21B

$163.00

-20.0%

-35% Multiple Compression

2.9×

$3.23B

$3.46B

$134.08

-35.0%

Software Baseline Floor (5.0× EV/Rev)

5.0×

$5.65B

$5.88B

$227.85

+13.6%

ESCO Technologies Inc. (ESE) 3-Scenario DCF Valuation Range

2D Institutional Valuation Sensitivity Heatmap

Institutional Software Quality Scorecard (83/100 · Grade A)

Core Investment Strengths & Moats

Key Operational & Dilution Risks

Reverse-DCF Solver: What Growth is Priced Into ESE?

ESCO Technologies Inc. (ESE) 5-Year Fundamental Forecast

Software & Cloud Services Peer Comparables & Rule of 40 Regression

Rule of 40 vs. EV / Revenue Multiple Regression

EV / Revenue Multiple Compression Stress Test

Frequently Asked Questions: ESCO Technologies Inc. (ESE) Valuation

What is ESCO Technologies Inc. (ESE)'s intrinsic DCF valuation and implied share price?

What is ESCO Technologies Inc. (ESE)'s Rule of 40 score and Free Cash Flow margin?

What revenue growth rate is priced into ESE stock according to Reverse-DCF analysis?

How does ESCO Technologies Inc. compare to Software & Cloud Services software peers?

How does Stock-Based Compensation (SBC) impact ESCO Technologies Inc. (ESE)'s valuation?

Related Software & Cloud Services Equity Research Reports

ESCO Technologies Inc. (ESE) 3-Scenario DCF Valuation Range

2D Institutional Valuation Sensitivity Heatmap

Institutional Software Quality Scorecard (83/100 · Grade A)

Core Investment Strengths & Moats

Key Operational & Dilution Risks

Reverse-DCF Solver: What Growth is Priced Into ESE?

ESCO Technologies Inc. (ESE) 5-Year Fundamental Forecast

Software & Cloud Services Peer Comparables & Rule of 40 Regression

Rule of 40 vs. EV / Revenue Multiple Regression

EV / Revenue Multiple Compression Stress Test

Frequently Asked Questions: ESCO Technologies Inc. (ESE) Valuation

What is ESCO Technologies Inc. (ESE)'s intrinsic DCF valuation and implied share price?

What is ESCO Technologies Inc. (ESE)'s Rule of 40 score and Free Cash Flow margin?

What revenue growth rate is priced into ESE stock according to Reverse-DCF analysis?

How does ESCO Technologies Inc. compare to Software & Cloud Services software peers?

How does Stock-Based Compensation (SBC) impact ESCO Technologies Inc. (ESE)'s valuation?

Related Software & Cloud Services Equity Research Reports