Harmonic Inc. (HLIT) DCF Valuation & Fundamental Primer
Harmonic Inc. (HLIT) currently trades at $10.03 with an enterprise value of $1.23B. Our proprietary institutional model rates Harmonic Inc. at 68/100 (Grade: B+ · Quality Software Operator). The current market price prices in an implied 5-year revenue CAGR of 14.9% vs. historical growth of 15.7% (Fairly Priced to Fundamentals).
Institutional fundamental teardown of Harmonic Inc. (HLIT) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Harmonic Inc. (HLIT) 3-Scenario DCF Valuation Range
Stress-test HLIT'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: $10.03).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $15.01 +50% | $15.98 +59% | $17.11 +71% | $18.45 +84% | $20.06 +100% |
| 9.3% | $13.43 +34% | $14.19 +41% | $15.07 +50% | $16.09 +60% | $17.29 +72% |
| 10.0% | $12.13 +21% | $12.74 +27% | $13.44 +34% | $14.24 +42% | $15.16 +51% |
| 10.8% | $11.04 +10% | $11.54 +15% | $12.11 +21% | $12.74 +27% | $13.47 +34% |
| 11.5% | $10.12 +1% | $10.53 +5% | $11.00 +10% | $11.52 +15% | $12.10 +21% |
Institutional Software Quality Scorecard (68/100 · Grade B+)
Solid software model with clear operating leverage, partially offset by standard SBC or moderate burn.
Solid cash generation with minor working capital absorption
Minimal dilution friction; management compensation aligned with shareholders
Sub-par gross margins; higher cost of delivery or hardware/services mix
Manageable debt load covered by recurring positive free cash flow
Core Investment Strengths & Moats
- Low dilution friction: SBC is only 4.1% of revenue
Key Operational & Dilution Risks
- Lower software gross margins (53.9%), indicating higher hosting or service delivery drag
Reverse-DCF Solver: What Growth is Priced Into HLIT?
Market implies 14.9% annual revenue growth over next 5 years (22.3% dilution-adjusted), in line with company run-rate.
Headline Reverse-DCF ignores Stock-Based Compensation (4.1% of revenue) and annual share dilution (0.5%/yr). Accounting for both requires 22.3% 5-year revenue CAGR to justify $10.03/sh on a true per-share economic cash flow basis.
Harmonic Inc. (HLIT) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $678.7M | $678.7M | $785.2M | $908.4M | $1.05B | $1.22B | $1.41B |
| Gross Profit | $365.9M | $365.9M | $423.3M | $489.7M | $566.6M | $655.5M | $758.3M |
| Operating Income (EBIT) | $63.1M | $63.1M | $73.0M | $84.5M | $97.7M | $113.1M | $130.8M |
| Stock-Based Compensation (SBC) | $28.1M | $28.1M | $32.5M | $37.6M | $43.5M | $50.3M | $58.2M |
| Unlevered Free Cash Flow (FCF) | $52.7M | $52.7M | $61.0M | $70.6M | $81.7M | $94.5M | $109.3M |
| SBC-Adjusted True Cash Flow | $24.7M | $24.6M | $28.5M | $33.0M | $38.1M | $44.1M | $51.1M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -12.0 + 0.47 × (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 |
|---|---|---|---|---|---|---|---|---|
| Harmonic Inc. | HLIT | $1.15B | $678.7M | 53.9% | 7.8% | 23.5% | 4.1% | 1.8× |
| 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 | 1.8× | $1.20B | $1.15B | $10.03 | 0.0% |
| -20% Multiple Compression | 1.4× | $958.9M | $912.0M | $7.94 | -20.0% |
| -35% Multiple Compression | 1.1× | $779.1M | $732.2M | $6.38 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $3.39B | $3.35B | $29.14 | +183.1% |
Frequently Asked Questions: Harmonic Inc. (HLIT) Valuation
What is Harmonic Inc. (HLIT)'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, Harmonic Inc. (HLIT) has a Base Case implied value of $10.35 per share (with a Bear Case of $4.63 and a Bull Case of $17.84), compared to its current price of $10.03. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Harmonic Inc. (HLIT)'s Rule of 40 score and Free Cash Flow margin?
Harmonic Inc. achieves a Rule of 40 score of 23.5%, combining a 15.7% revenue growth run-rate with a 7.8% TTM free cash flow margin on $678.7M 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 HLIT stock according to Reverse-DCF analysis?
At $10.03 per share (Enterprise Value of $1.20B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 14.9%, compared to Harmonic Inc.'s historical CAGR of 15.7%. Overall market expectations are rated as "Fairly Priced to Fundamentals".
How does Harmonic Inc. compare to Software & Cloud Services software peers?
Harmonic Inc. (HLIT) earns an institutional Software Quality Score of 68/100 (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 Harmonic Inc. (HLIT)'s valuation?
Harmonic Inc. recorded $28.1M in TTM stock-based compensation (4.1% of revenue). When treating SBC as a cash-equivalent compensation expense, Harmonic Inc.'s SBC-adjusted free cash flow yield is 2.1%, scoring 25/25 on our Shareholder Dilution Friction pillar.