Penguin Solutions, Inc. (PENG) DCF Valuation & Fundamental Primer
Penguin Solutions, Inc. (PENG) currently trades at $21.07 with an enterprise value of $1.63B. Our proprietary institutional model rates Penguin Solutions, Inc. at 75/100 (Grade: B+ · Quality Software Operator). The current market price prices in an implied 5-year revenue CAGR of -0.8% vs. historical growth of 6.7% (Substantial Margin of Safety).
Institutional fundamental teardown of Penguin Solutions, Inc. (PENG) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Penguin Solutions, Inc. (PENG) 3-Scenario DCF Valuation Range
Stress-test PENG'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: $21.07).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $45.51 +116% | $48.35 +129% | $51.67 +145% | $55.58 +164% | $60.28 +186% |
| 9.3% | $40.87 +94% | $43.10 +105% | $45.67 +117% | $48.65 +131% | $52.15 +147% |
| 10.0% | $37.04 +76% | $38.84 +84% | $40.88 +94% | $43.21 +105% | $45.90 +118% |
| 10.8% | $33.84 +61% | $35.31 +68% | $36.96 +75% | $38.82 +84% | $40.94 +94% |
| 11.5% | $31.12 +48% | $32.34 +53% | $33.70 +60% | $35.21 +67% | $36.91 +75% |
Institutional Software Quality Scorecard (75/100 · 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
Manageable debt load covered by recurring positive free cash flow
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 135% 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 (28.8%), indicating higher hosting or service delivery drag
Reverse-DCF Solver: What Growth is Priced Into PENG?
The current share price only requires -0.8% 5-year CAGR (4.2% dilution-adjusted), well below historical growth of 6.7%. If the company maintains baseline execution, there is asymmetric upside.
Headline Reverse-DCF ignores Stock-Based Compensation (3.0% of revenue) and annual share dilution (0.4%/yr). Accounting for both requires 4.2% 5-year revenue CAGR to justify $21.07/sh on a true per-share economic cash flow basis.
Penguin Solutions, Inc. (PENG) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $1.37B | $1.37B | $1.46B | $1.56B | $1.66B | $1.77B | $1.89B |
| Gross Profit | $394.3M | $394.2M | $420.7M | $448.9M | $479.0M | $511.2M | $545.5M |
| Operating Income (EBIT) | $74.2M | $74.2M | $79.2M | $84.5M | $90.1M | $96.2M | $102.7M |
| Stock-Based Compensation (SBC) | $41.2M | $41.2M | $44.0M | $46.9M | $50.1M | $53.4M | $57.0M |
| Unlevered Free Cash Flow (FCF) | $100.1M | $100.1M | $106.8M | $113.9M | $121.6M | $129.7M | $138.4M |
| SBC-Adjusted True Cash Flow | $58.9M | $58.9M | $62.8M | $67.0M | $71.5M | $76.3M | $81.4M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -7.0 + 0.37 × (Rule of 40) · R² = 69%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 |
|---|---|---|---|---|---|---|---|---|
| Penguin Solutions, Inc. | PENG | $1.11B | $1.37B | 28.8% | 7.3% | 14.0% | 3.0% | 0.9× |
| 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 | 0.9× | $1.18B | $1.11B | $21.07 | 0.0% |
| -20% Multiple Compression | 0.7× | $947.7M | $876.8M | $16.59 | -20.0% |
| -35% Multiple Compression | 0.6× | $770.0M | $699.1M | $13.23 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $6.84B | $6.77B | $128.14 | +477.8% |
Frequently Asked Questions: Penguin Solutions, Inc. (PENG) Valuation
What is Penguin Solutions, Inc. (PENG)'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, Penguin Solutions, Inc. (PENG) has a Base Case implied value of $29.53 per share (with a Bear Case of $16.00 and a Bull Case of $44.93), compared to its current price of $21.07. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Penguin Solutions, Inc. (PENG)'s Rule of 40 score and Free Cash Flow margin?
Penguin Solutions, Inc. achieves a Rule of 40 score of 14.0%, combining a 6.7% revenue growth run-rate with a 7.3% TTM free cash flow margin on $1.37B 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 PENG stock according to Reverse-DCF analysis?
At $21.07 per share (Enterprise Value of $1.18B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of -0.8%, compared to Penguin Solutions, Inc.'s historical CAGR of 6.7%. Overall market expectations are rated as "Substantial Margin of Safety".
How does Penguin Solutions, Inc. compare to Software & Cloud Services software peers?
Penguin Solutions, Inc. (PENG) earns an institutional Software Quality Score of 75/100 (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 Penguin Solutions, Inc. (PENG)'s valuation?
Penguin Solutions, Inc. recorded $41.2M in TTM stock-based compensation (3.0% of revenue). When treating SBC as a cash-equivalent compensation expense, Penguin Solutions, Inc.'s SBC-adjusted free cash flow yield is 5.3%, scoring 25/25 on our Shareholder Dilution Friction pillar.