Infosys Limited (INFY) DCF Valuation & Fundamental Primer
Infosys Limited (INFY) currently trades at $17.93 with an enterprise value of $75.84B. Our proprietary institutional model rates Infosys Limited at 77/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 8.0% vs. historical growth of 9.2% (Fairly Priced to Fundamentals).
Institutional fundamental teardown of Infosys Limited (INFY) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Infosys Limited (INFY) 3-Scenario DCF Valuation Range
Stress-test INFY'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: $17.93).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $20.88 +17% | $22.13 +23% | $23.59 +32% | $25.31 +41% | $27.37 +53% |
| 9.3% | $18.84 +5% | $19.83 +11% | $20.96 +17% | $22.27 +24% | $23.80 +33% |
| 10.0% | $17.17 -4% | $17.96 +0% | $18.85 +5% | $19.88 +11% | $21.06 +17% |
| 10.8% | $15.76 -12% | $16.41 -8% | $17.13 -4% | $17.95 +0% | $18.88 +5% |
| 11.5% | $14.57 -19% | $15.11 -16% | $15.70 -12% | $16.37 -9% | $17.12 -5% |
Institutional Software Quality Scorecard (77/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
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
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- High cash conversion: 100%+ of operating income converted to free cash flow
- Low dilution friction: SBC is only 0.0% of revenue
- Net cash positive: $2.24B balance sheet buffer
Key Operational & Dilution Risks
- Lower software gross margins (30.5%), indicating higher hosting or service delivery drag
Reverse-DCF Solver: What Growth is Priced Into INFY?
Market implies 8.0% annual revenue growth over next 5 years (8.0% dilution-adjusted), in line with company run-rate.
Headline Reverse-DCF ignores Stock-Based Compensation (0.0% of revenue) and annual share dilution (0.0%/yr). Accounting for both requires 8.0% 5-year revenue CAGR to justify $17.93/sh on a true per-share economic cash flow basis.
Infosys Limited (INFY) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $19.28B | $19.28B | $21.05B | $22.98B | $25.10B | $27.40B | $29.92B |
| Gross Profit | $5.87B | $5.87B | $6.41B | $7.00B | $7.64B | $8.35B | $9.11B |
| Operating Income (EBIT) | $4.07B | $4.07B | $4.45B | $4.85B | $5.30B | $5.79B | $6.32B |
| Stock-Based Compensation (SBC) | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Unlevered Free Cash Flow (FCF) | $4.20B | $4.20B | $4.58B | $5.01B | $5.47B | $5.97B | $6.52B |
| SBC-Adjusted True Cash Flow | $4.20B | $4.20B | $4.58B | $5.01B | $5.47B | $5.97B | $6.52B |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -16.3 + 0.56 × (Rule of 40) · R² = 74%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 |
|---|---|---|---|---|---|---|---|---|
| Infosys Limited | INFY | $74.33B | $19.28B | 30.5% | 21.8% | 31.0% | — | 3.7× |
| 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 | 3.7× | $72.08B | $74.33B | $17.93 | 0.0% |
| -20% Multiple Compression | 3.0× | $57.67B | $59.91B | $14.45 | -20.0% |
| -35% Multiple Compression | 2.4× | $46.86B | $49.10B | $11.84 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $96.39B | $98.63B | $23.79 | +33.7% |
Frequently Asked Questions: Infosys Limited (INFY) Valuation
What is Infosys Limited (INFY)'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, Infosys Limited (INFY) has a Base Case implied value of $18.83 per share (with a Bear Case of $10.30 and a Bull Case of $28.96), compared to its current price of $17.93. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Infosys Limited (INFY)'s Rule of 40 score and Free Cash Flow margin?
Infosys Limited achieves a Rule of 40 score of 31.0%, combining a 9.2% revenue growth run-rate with a 21.8% TTM free cash flow margin on $19.28B 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 INFY stock according to Reverse-DCF analysis?
At $17.93 per share (Enterprise Value of $72.08B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 8.0%, compared to Infosys Limited's historical CAGR of 9.2%. Overall market expectations are rated as "Fairly Priced to Fundamentals".
How does Infosys Limited compare to Software & Cloud Services software peers?
Infosys Limited (INFY) earns an institutional Software Quality Score of 77/100 (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 Infosys Limited (INFY)'s valuation?
Infosys Limited recorded $0 in TTM stock-based compensation (15.0% of revenue). When treating SBC as a cash-equivalent compensation expense, Infosys Limited's SBC-adjusted free cash flow yield is 5.7%, scoring 25/25 on our Shareholder Dilution Friction pillar.