New Relic, Inc. (NEWR) DCF Valuation & Fundamental Primer
New Relic, Inc. (NEWR) currently trades at $86.99 with an enterprise value of $9.16B. Our proprietary institutional model rates New Relic, Inc. at 82/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 8.5% vs. historical growth of 20.5% (Substantial Margin of Safety).
Institutional fundamental teardown of New Relic, Inc. (NEWR) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
New Relic, Inc. (NEWR) 3-Scenario DCF Valuation Range
Stress-test NEWR'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: $86.99).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $150.43 +73% | $159.65 +84% | $170.40 +96% | $183.11 +111% | $198.37 +128% |
| 9.3% | $135.47 +56% | $142.73 +64% | $151.06 +74% | $160.74 +85% | $172.09 +98% |
| 10.0% | $123.17 +42% | $129.00 +48% | $135.62 +56% | $143.18 +65% | $151.91 +75% |
| 10.8% | $112.88 +30% | $117.66 +35% | $123.01 +41% | $129.05 +48% | $135.93 +56% |
| 11.5% | $104.17 +20% | $108.12 +24% | $112.52 +29% | $117.44 +35% | $122.97 +41% |
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 177% of EBIT driven by upfront annual collections
- Top-quartile software unit economics: 79.7% gross margin and 46.8% Rule of 40 score
- Net cash positive: $472.0M balance sheet buffer
Key Operational & Dilution Risks
- Substantial SBC dilution drag: SBC is 17.7% of revenue ($218.7M)
Reverse-DCF Solver: What Growth is Priced Into NEWR?
The current share price only requires 8.5% 5-year CAGR (21.4% dilution-adjusted), well below historical growth of 20.5%. If the company maintains baseline execution, there is asymmetric upside.
Headline Reverse-DCF ignores Stock-Based Compensation (17.7% of revenue) and annual share dilution (1.8%/yr). Accounting for both requires 21.4% 5-year revenue CAGR to justify $86.99/sh on a true per-share economic cash flow basis.
New Relic, Inc. (NEWR) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $1.24B | $1.24B | $1.49B | $1.79B | $2.16B | $2.61B | $3.14B |
| Gross Profit | $984.8M | $984.8M | $1.19B | $1.43B | $1.72B | $2.08B | $2.50B |
| Operating Income (EBIT) | $184.1M | $184.1M | $221.9M | $267.3M | $322.1M | $388.2M | $467.8M |
| Stock-Based Compensation (SBC) | $218.7M | $218.7M | $263.5M | $317.6M | $382.7M | $461.1M | $555.7M |
| Unlevered Free Cash Flow (FCF) | $325.0M | $325.0M | $391.6M | $471.9M | $568.6M | $685.2M | $825.6M |
| SBC-Adjusted True Cash Flow | $106.3M | $106.3M | $128.1M | $154.3M | $185.9M | $224.1M | $270.0M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -33.6 + 0.87 × (Rule of 40) · R² = 79%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 |
|---|---|---|---|---|---|---|---|---|
| New Relic, Inc. | NEWR | $6.18B | $1.24B | 79.7% | 26.3% | 46.8% | 17.7% | 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× | $5.71B | $6.18B | $86.99 | 0.0% |
| -20% Multiple Compression | 3.7× | $4.57B | $5.04B | $70.92 | -20.0% |
| -35% Multiple Compression | 3.0× | $3.71B | $4.18B | $58.87 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $6.18B | $6.65B | $93.64 | +8.3% |
Frequently Asked Questions: New Relic, Inc. (NEWR) Valuation
What is New Relic, Inc. (NEWR)'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, New Relic, Inc. (NEWR) has a Base Case implied value of $135.62 per share (with a Bear Case of $61.88 and a Bull Case of $238.67), compared to its current price of $86.99. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is New Relic, Inc. (NEWR)'s Rule of 40 score and Free Cash Flow margin?
New Relic, Inc. achieves a Rule of 40 score of 46.8%, combining a 20.5% revenue growth run-rate with a 26.3% TTM free cash flow margin on $1.24B 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 NEWR stock according to Reverse-DCF analysis?
At $86.99 per share (Enterprise Value of $5.71B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 8.5%, compared to New Relic, Inc.'s historical CAGR of 20.5%. Overall market expectations are rated as "Substantial Margin of Safety".
How does New Relic, Inc. compare to Software & Cloud Services software peers?
New Relic, Inc. (NEWR) 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 New Relic, Inc. (NEWR)'s valuation?
New Relic, Inc. recorded $218.7M in TTM stock-based compensation (17.7% of revenue). When treating SBC as a cash-equivalent compensation expense, New Relic, Inc.'s SBC-adjusted free cash flow yield is 1.7%, scoring 10/25 on our Shareholder Dilution Friction pillar.