Keysight Technologies, Inc. (KEYS) DCF Valuation & Fundamental Primer
Keysight Technologies, Inc. (KEYS) currently trades at $205.12 with an enterprise value of $18.95B. Our proprietary institutional model rates Keysight Technologies, Inc. at 70/100 (Grade: B+ · Quality Software Operator). The current market price prices in an implied 5-year revenue CAGR of 18.2% vs. historical growth of 2.1% (Aggressive Growth Expectations Priced In).
Institutional fundamental teardown of Keysight Technologies, Inc. (KEYS) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Keysight Technologies, Inc. (KEYS) 3-Scenario DCF Valuation Range
Stress-test KEYS'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: $205.12).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $115.58 -44% | $122.79 -40% | $131.20 -36% | $141.14 -31% | $153.07 -25% |
| 9.3% | $103.74 -49% | $109.42 -47% | $115.94 -43% | $123.51 -40% | $132.39 -35% |
| 10.0% | $93.99 -54% | $98.55 -52% | $103.73 -49% | $109.65 -47% | $116.47 -43% |
| 10.8% | $85.82 -58% | $89.55 -56% | $93.74 -54% | $98.47 -52% | $103.85 -49% |
| 11.5% | $78.88 -62% | $81.98 -60% | $85.42 -58% | $89.26 -56% | $93.59 -54% |
Institutional Software Quality Scorecard (70/100 · Grade B+)
Solid software model with clear operating leverage, partially offset by standard SBC or moderate burn.
Elite deferred revenue float; FCF exceeds operating income by >20%
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-grade cash conversion: FCF is 149% of EBIT driven by upfront annual collections
- Low dilution friction: SBC is only 3.0% of revenue
Key Operational & Dilution Risks
- Lower software gross margins (62.1%), indicating higher hosting or service delivery drag
Reverse-DCF Solver: What Growth is Priced Into KEYS?
The current share price demands 18.2% 5-year CAGR (20.2% net of SBC & dilution)—a +16.1% acceleration over historical run-rate (2.1%). Any growth slowdown risks valuation multiple contraction.
Headline Reverse-DCF ignores Stock-Based Compensation (3.0% of revenue) and annual share dilution (0.4%/yr). Accounting for both requires 20.2% 5-year revenue CAGR to justify $205.12/sh on a true per-share economic cash flow basis.
Keysight Technologies, Inc. (KEYS) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $5.38B | $5.38B | $5.49B | $5.61B | $5.73B | $5.85B | $5.97B |
| Gross Profit | $3.34B | $3.34B | $3.41B | $3.48B | $3.55B | $3.63B | $3.71B |
| Operating Income (EBIT) | $948.0M | $948.2M | $968.3M | $989.0M | $1.01B | $1.03B | $1.05B |
| Stock-Based Compensation (SBC) | $162.0M | $161.8M | $165.2M | $168.8M | $172.3M | $176.0M | $179.8M |
| Unlevered Free Cash Flow (FCF) | $1.41B | $1.41B | $1.44B | $1.47B | $1.50B | $1.53B | $1.57B |
| SBC-Adjusted True Cash Flow | $1.25B | $1.25B | $1.27B | $1.30B | $1.33B | $1.36B | $1.39B |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -8.7 + 0.41 × (Rule of 40) · R² = 56%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 |
|---|---|---|---|---|---|---|---|---|
| Keysight Technologies, Inc. | KEYS | $35.24B | $5.38B | 62.1% | 26.2% | 28.3% | 3.0% | 6.8× |
| 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 | 6.8× | $36.34B | $35.24B | $205.12 | 0.0% |
| -20% Multiple Compression | 5.4× | $29.07B | $27.97B | $162.82 | -20.0% |
| -35% Multiple Compression | 4.4× | $23.62B | $22.52B | $131.09 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $26.88B | $25.78B | $150.03 | -26.0% |
Frequently Asked Questions: Keysight Technologies, Inc. (KEYS) Valuation
What is Keysight Technologies, Inc. (KEYS)'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, Keysight Technologies, Inc. (KEYS) has a Base Case implied value of $103.91 per share (with a Bear Case of $62.04 and a Bull Case of $147.63), compared to its current price of $205.12. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Keysight Technologies, Inc. (KEYS)'s Rule of 40 score and Free Cash Flow margin?
Keysight Technologies, Inc. achieves a Rule of 40 score of 28.3%, combining a 2.1% revenue growth run-rate with a 26.2% TTM free cash flow margin on $5.38B 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 KEYS stock according to Reverse-DCF analysis?
At $205.12 per share (Enterprise Value of $36.34B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 18.2%, compared to Keysight Technologies, Inc.'s historical CAGR of 2.1%. Overall market expectations are rated as "Aggressive Growth Expectations Priced In".
How does Keysight Technologies, Inc. compare to Software & Cloud Services software peers?
Keysight Technologies, Inc. (KEYS) earns an institutional Software Quality Score of 70/100 (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 Keysight Technologies, Inc. (KEYS)'s valuation?
Keysight Technologies, Inc. recorded $162.0M in TTM stock-based compensation (3.0% of revenue). When treating SBC as a cash-equivalent compensation expense, Keysight Technologies, Inc.'s SBC-adjusted free cash flow yield is 3.5%, scoring 25/25 on our Shareholder Dilution Friction pillar.