II-VI Incorporated (IIVI) DCF Valuation & Fundamental Primer
II-VI Incorporated (IIVI) currently trades at $227.08 with an enterprise value of $40.24B. Our proprietary institutional model rates II-VI Incorporated at 82/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 11.1% vs. historical growth of 20.9% (Substantial Margin of Safety).
Institutional fundamental teardown of II-VI Incorporated (IIVI) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
II-VI Incorporated (IIVI) 3-Scenario DCF Valuation Range
Stress-test IIVI'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: $227.08).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $356.66 +57% | $378.09 +67% | $403.10 +78% | $432.65 +91% | $468.10 +106% |
| 9.3% | $321.87 +42% | $338.75 +49% | $358.14 +58% | $380.62 +68% | $407.02 +79% |
| 10.0% | $293.28 +29% | $306.85 +35% | $322.24 +42% | $339.82 +50% | $360.10 +59% |
| 10.8% | $269.38 +19% | $280.48 +24% | $292.92 +29% | $306.97 +35% | $322.96 +42% |
| 11.5% | $249.12 +10% | $258.32 +14% | $268.54 +18% | $279.97 +23% | $292.83 +29% |
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 671% of EBIT driven by upfront annual collections
- Top-quartile software unit economics: 79.9% gross margin and 44.4% Rule of 40 score
- Net cash positive: $3.06B balance sheet buffer
Key Operational & Dilution Risks
- Substantial SBC dilution drag: SBC is 19.1% of revenue ($1.14B)
Reverse-DCF Solver: What Growth is Priced Into IIVI?
The current share price only requires 11.1% 5-year CAGR (27.3% dilution-adjusted), well below historical growth of 20.9%. If the company maintains baseline execution, there is asymmetric upside.
Headline Reverse-DCF ignores Stock-Based Compensation (19.1% of revenue) and annual share dilution (1.8%/yr). Accounting for both requires 27.3% 5-year revenue CAGR to justify $227.08/sh on a true per-share economic cash flow basis.
II-VI Incorporated (IIVI) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $5.98B | $5.98B | $7.23B | $8.75B | $10.57B | $12.78B | $15.45B |
| Gross Profit | $4.78B | $4.78B | $5.78B | $6.99B | $8.45B | $10.21B | $12.35B |
| Operating Income (EBIT) | $209.4M | $209.4M | $253.2M | $306.1M | $370.1M | $447.4M | $540.9M |
| Stock-Based Compensation (SBC) | $1.14B | $1.14B | $1.38B | $1.67B | $2.02B | $2.44B | $2.95B |
| Unlevered Free Cash Flow (FCF) | $1.41B | $1.41B | $1.70B | $2.06B | $2.48B | $3.00B | $3.63B |
| SBC-Adjusted True Cash Flow | $263.3M | $263.3M | $318.3M | $384.8M | $465.2M | $562.5M | $680.0M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -32.2 + 0.85 × (Rule of 40) · R² = 83%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 |
|---|---|---|---|---|---|---|---|---|
| II-VI Incorporated | IIVI | $30.51B | $5.98B | 79.9% | 23.5% | 44.4% | 19.1% | 4.6× |
| 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 | 4.6× | $27.45B | $30.51B | $227.08 | 0.0% |
| -20% Multiple Compression | 3.7× | $21.96B | $25.02B | $186.22 | -20.0% |
| -35% Multiple Compression | 3.0× | $17.84B | $20.91B | $155.58 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $29.92B | $32.98B | $245.42 | +9.0% |
Frequently Asked Questions: II-VI Incorporated (IIVI) Valuation
What is II-VI Incorporated (IIVI)'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, II-VI Incorporated (IIVI) has a Base Case implied value of $322.24 per share (with a Bear Case of $150.03 and a Bull Case of $564.00), compared to its current price of $227.08. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is II-VI Incorporated (IIVI)'s Rule of 40 score and Free Cash Flow margin?
II-VI Incorporated achieves a Rule of 40 score of 44.4%, combining a 20.9% revenue growth run-rate with a 23.5% TTM free cash flow margin on $5.98B 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 IIVI stock according to Reverse-DCF analysis?
At $227.08 per share (Enterprise Value of $27.45B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 11.1%, compared to II-VI Incorporated's historical CAGR of 20.9%. Overall market expectations are rated as "Substantial Margin of Safety".
How does II-VI Incorporated compare to Software & Cloud Services software peers?
II-VI Incorporated (IIVI) 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 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact II-VI Incorporated (IIVI)'s valuation?
II-VI Incorporated recorded $1.14B in TTM stock-based compensation (19.1% of revenue). When treating SBC as a cash-equivalent compensation expense, II-VI Incorporated's SBC-adjusted free cash flow yield is 0.9%, scoring 10/25 on our Shareholder Dilution Friction pillar.