Formula Systems (1985) Ltd. (FORTY) DCF Valuation & Fundamental Primer
Formula Systems (1985) Ltd. (FORTY) currently trades at $174.99 with an enterprise value of $5.36B. Our proprietary institutional model rates Formula Systems (1985) Ltd. at 67/100 (Grade: B+ · Quality Software Operator). The current market price prices in an implied 5-year revenue CAGR of -5.4% vs. historical growth of 9.3% (Substantial Margin of Safety).
Institutional fundamental teardown of Formula Systems (1985) Ltd. (FORTY) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Formula Systems (1985) Ltd. (FORTY) 3-Scenario DCF Valuation Range
Stress-test FORTY'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: $174.99).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $376.59 +115% | $400.43 +129% | $428.25 +145% | $461.12 +164% | $500.57 +186% |
| 9.3% | $337.65 +93% | $356.43 +104% | $377.99 +116% | $403.01 +130% | $432.37 +147% |
| 10.0% | $305.61 +75% | $320.71 +83% | $337.82 +93% | $357.38 +104% | $379.95 +117% |
| 10.8% | $278.80 +59% | $291.14 +66% | $304.98 +74% | $320.61 +83% | $338.40 +93% |
| 11.5% | $256.03 +46% | $266.27 +52% | $277.64 +59% | $290.36 +66% | $304.66 +74% |
Institutional Software Quality Scorecard (67/100 · Grade B+)
Solid software model with clear operating leverage, partially offset by standard SBC or moderate burn.
Strong cash conversion; 100%+ of operating profit turns into free cash
Minimal dilution friction; management compensation aligned with shareholders
Sub-par gross margins; higher cost of delivery or hardware/services mix
Moderate leverage or cash burn; monitor liquidity runway
Core Investment Strengths & Moats
- High cash conversion: 100%+ of operating income converted to free cash flow
- Low dilution friction: SBC is only 0.6% of revenue
Key Operational & Dilution Risks
- Lower software gross margins (24.8%), indicating higher hosting or service delivery drag
Reverse-DCF Solver: What Growth is Priced Into FORTY?
The current share price only requires -5.4% 5-year CAGR (-4.7% dilution-adjusted), well below historical growth of 9.3%. If the company maintains baseline execution, there is asymmetric upside.
Headline Reverse-DCF ignores Stock-Based Compensation (0.6% of revenue) and annual share dilution (0.1%/yr). Accounting for both requires -4.7% 5-year revenue CAGR to justify $174.99/sh on a true per-share economic cash flow basis.
Formula Systems (1985) Ltd. (FORTY) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $2.76B | $2.76B | $3.01B | $3.29B | $3.60B | $3.93B | $4.30B |
| Gross Profit | $684.0M | $684.1M | $747.6M | $816.9M | $892.6M | $975.3M | $1.07B |
| Operating Income (EBIT) | $270.5M | $270.5M | $295.6M | $323.0M | $352.9M | $385.6M | $421.4M |
| Stock-Based Compensation (SBC) | $16.2M | $16.3M | $17.8M | $19.4M | $21.2M | $23.2M | $25.3M |
| Unlevered Free Cash Flow (FCF) | $295.5M | $295.6M | $323.0M | $353.0M | $385.7M | $421.4M | $460.5M |
| SBC-Adjusted True Cash Flow | $279.3M | $279.3M | $305.2M | $333.5M | $364.4M | $398.2M | $435.1M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -10.4 + 0.44 × (Rule of 40) · R² = 73%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 |
|---|---|---|---|---|---|---|---|---|
| Formula Systems (1985) Ltd. | FORTY | $2.68B | $2.76B | 24.8% | 10.7% | 20.0% | 0.6% | 1.0× |
| 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 | 1.0× | $2.86B | $2.68B | $174.99 | 0.0% |
| -20% Multiple Compression | 0.8× | $2.29B | $2.11B | $137.62 | -20.0% |
| -35% Multiple Compression | 0.7× | $1.86B | $1.68B | $109.59 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $13.79B | $13.61B | $888.81 | +382.0% |
Frequently Asked Questions: Formula Systems (1985) Ltd. (FORTY) Valuation
What is Formula Systems (1985) Ltd. (FORTY)'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, Formula Systems (1985) Ltd. (FORTY) has a Base Case implied value of $338.05 per share (with a Bear Case of $174.51 and a Bull Case of $532.22), compared to its current price of $174.99. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Formula Systems (1985) Ltd. (FORTY)'s Rule of 40 score and Free Cash Flow margin?
Formula Systems (1985) Ltd. achieves a Rule of 40 score of 20.0%, combining a 9.3% revenue growth run-rate with a 10.7% TTM free cash flow margin on $2.76B 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 FORTY stock according to Reverse-DCF analysis?
At $174.99 per share (Enterprise Value of $2.86B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of -5.4%, compared to Formula Systems (1985) Ltd.'s historical CAGR of 9.3%. Overall market expectations are rated as "Substantial Margin of Safety".
How does Formula Systems (1985) Ltd. compare to Software & Cloud Services software peers?
Formula Systems (1985) Ltd. (FORTY) earns an institutional Software Quality Score of 67/100 (Grade B+ — Quality Software Operator). 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 Formula Systems (1985) Ltd. (FORTY)'s valuation?
Formula Systems (1985) Ltd. recorded $16.2M in TTM stock-based compensation (0.6% of revenue). When treating SBC as a cash-equivalent compensation expense, Formula Systems (1985) Ltd.'s SBC-adjusted free cash flow yield is 10.4%, scoring 25/25 on our Shareholder Dilution Friction pillar.