Power Integrations, Inc. (POWI) DCF Valuation & Fundamental Primer
Power Integrations, Inc. (POWI) currently trades at $37.72 with an enterprise value of $665.4M. Our proprietary institutional model rates Power Integrations, Inc. at 76/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 23.8% vs. historical growth of -3.8% (Aggressive Growth Expectations Priced In).
Institutional fundamental teardown of Power Integrations, Inc. (POWI) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Power Integrations, Inc. (POWI) 3-Scenario DCF Valuation Range
Stress-test POWI'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: $37.72).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $14.22 -62% | $14.98 -60% | $15.86 -58% | $16.90 -55% | $18.16 -52% |
| 9.3% | $12.97 -66% | $13.57 -64% | $14.25 -62% | $15.05 -60% | $15.98 -58% |
| 10.0% | $11.94 -68% | $12.42 -67% | $12.96 -66% | $13.59 -64% | $14.30 -62% |
| 10.8% | $11.08 -71% | $11.47 -70% | $11.91 -68% | $12.41 -67% | $12.97 -66% |
| 11.5% | $10.34 -73% | $10.67 -72% | $11.03 -71% | $11.43 -70% | $11.89 -68% |
Institutional Software Quality Scorecard (76/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
Elite deferred revenue float; FCF exceeds operating income by >20%
Disciplined equity compensation well below software industry average
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-grade cash conversion: FCF is 356% of EBIT driven by upfront annual collections
- Net cash positive: $51.0M balance sheet buffer
Key Operational & Dilution Risks
- Lower software gross margins (53.6%), indicating higher hosting or service delivery drag
Reverse-DCF Solver: What Growth is Priced Into POWI?
The current share price demands 23.8% 5-year CAGR (34.1% net of SBC & dilution)—a +27.5% acceleration over historical run-rate (-3.8%). Any growth slowdown risks valuation multiple contraction.
Headline Reverse-DCF ignores Stock-Based Compensation (8.4% of revenue) and annual share dilution (1.0%/yr). Accounting for both requires 34.1% 5-year revenue CAGR to justify $37.72/sh on a true per-share economic cash flow basis.
Power Integrations, Inc. (POWI) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $419.0M | $419.0M | $403.2M | $388.1M | $373.5M | $359.4M | $345.9M |
| Gross Profit | $224.8M | $224.7M | $216.3M | $208.2M | $200.3M | $192.8M | $185.5M |
| Operating Income (EBIT) | $17.9M | $17.9M | $17.3M | $16.6M | $16.0M | $15.4M | $14.8M |
| Stock-Based Compensation (SBC) | $35.1M | $35.1M | $33.7M | $32.5M | $31.3M | $30.1M | $29.0M |
| Unlevered Free Cash Flow (FCF) | $63.9M | $63.9M | $61.5M | $59.2M | $57.0M | $54.8M | $52.8M |
| SBC-Adjusted True Cash Flow | $28.8M | $28.8M | $27.7M | $26.7M | $25.7M | $24.7M | $23.8M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -1.2 + 0.26 × (Rule of 40) · R² = 49%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 |
|---|---|---|---|---|---|---|---|---|
| Power Integrations, Inc. | POWI | $2.09B | $419.0M | 53.6% | 15.3% | 11.5% | 8.4% | 4.9× |
| 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 | 4.9× | $2.04B | $2.09B | $37.72 | 0.0% |
| -20% Multiple Compression | 3.9× | $1.63B | $1.68B | $30.36 | -20.0% |
| -35% Multiple Compression | 3.2× | $1.32B | $1.37B | $24.84 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $2.09B | $2.15B | $38.78 | +2.9% |
Frequently Asked Questions: Power Integrations, Inc. (POWI) Valuation
What is Power Integrations, Inc. (POWI)'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, Power Integrations, Inc. (POWI) has a Base Case implied value of $12.95 per share (with a Bear Case of $9.44 and a Bull Case of $16.12), compared to its current price of $37.72. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Power Integrations, Inc. (POWI)'s Rule of 40 score and Free Cash Flow margin?
Power Integrations, Inc. achieves a Rule of 40 score of 11.5%, combining a -3.8% revenue growth run-rate with a 15.3% TTM free cash flow margin on $419.0M 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 POWI stock according to Reverse-DCF analysis?
At $37.72 per share (Enterprise Value of $2.04B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 23.8%, compared to Power Integrations, Inc.'s historical CAGR of -3.8%. Overall market expectations are rated as "Aggressive Growth Expectations Priced In".
How does Power Integrations, Inc. compare to Software & Cloud Services software peers?
Power Integrations, Inc. (POWI) earns an institutional Software Quality Score of 76/100 (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 Power Integrations, Inc. (POWI)'s valuation?
Power Integrations, Inc. recorded $35.1M in TTM stock-based compensation (8.4% of revenue). When treating SBC as a cash-equivalent compensation expense, Power Integrations, Inc.'s SBC-adjusted free cash flow yield is 1.4%, scoring 21/25 on our Shareholder Dilution Friction pillar.