SOUNDTHINKING, INC. (SSTI) DCF Valuation & Fundamental Primer
SOUNDTHINKING, INC. (SSTI) trades at $16.44 with a market enterprise value of $209.1M and generated $98.0M in TTM revenue and -$1.1M in free cash flow (filed 2026-08-14 (period ended 2026-06-30)). Our 5-year DCF model estimates an implied intrinsic value of -$1.44 per diluted share (Grade: C · 41/100 · Capital Intensive / Low Margin).
SEC 10-K/10-Q DCF teardown of SOUNDTHINKING, INC. (SSTI): $98.0M TTM revenue (15.7% growth), 50.1% GAAP gross margin, -1.1% FCF margin, 9.3% SBC/revenue, and R&D Return Grade D (Faders, $-0.09 new gross profit per $1 prior R&D).
SOUNDTHINKING, INC. (SSTI) earns a "Watch" rating and an institutional Quality Score of 41/100 (Grade C). On $98.0M in baseline revenue (15.7% growth, 50.1% gross margin, -1.1% FCF margin), our 5-year DCF yields an Enterprise Value of -$25.2M (-$1.44/share vs. $16.44 market price). On the R&D Return Benchmark, SSTI ranks #160 of 174 (Faders · Grade D, -0.09× return).
Gross Margin & Unit Economics: SOUNDTHINKING, INC. operates at a 50.1% gross margin on $98.0M revenue (22.6 pts below the Software - Application median of 72.7%).
R&D Productivity (Faders · Grade D): Investing 15.2% of revenue in R&D ($15.9M) generates $-0.09 of incremental gross profit per R&D dollar (Rank #160 of 174).
Rule of 40 & Cash Conversion: Combining 15.7% top-line growth with -1.1% FCF margin yields a 14.6% Rule of 40 score (vs. 47.2% cohort median) and -$25.2M DCF Enterprise Value.
3-Statement Financial Schedule & 5-Year Horizon
Synchronized directly with the 3-Year Operating Statement (50.1% Gross Margin · 15.7% Growth)
| Income Statement Line | Year 1 (2026) | Year 2 (2027) | Year 3 (2028) |
|---|---|---|---|
| Revenue | $98.0M | $113.3M | $131.1M |
| Cost of Revenue (COGS) | ($48.9M) | ($56.0M) | ($64.1M) |
| Gross Profit & Margin | $49.0M (50.1%) | $57.3M (50.6%) | $66.9M (51.1%) |
| Research & Development (R&D) | $16.5M | $18.3M | $20.3M |
| Sales & Marketing (S&M) | $35.1M | $38.9M | $43.2M |
| General & Administrative (G&A) | $13.6M | $15.1M | $16.8M |
| Operating EBIT | -$16.1M (-16.4%) | -$15.0M (-13.3%) | -$13.3M (-10.1%) |
| Adjusted EBITDA | -$13.6M (-13.9%) | -$12.2M (-10.8%) | -$10.0M (-7.6%) |
3 Key Underwriting Risks
Structural sensitivities monitored in the 3-Statement Financial Engine
Value-Creation Levers · Quantified Statement Impact
Apply any lever below to write its operating assumptions directly into the 3-Statement Model
Automate cloud hosting & support workflows to lift gross margin from 50.1% to 55.1%.
Align R&D intensity and ASC 350-40 capitalization to the R&D Compounders cohort median, recapturing $2.0M in annual EBITDA.
Lift net dollar retention and expansion velocity by +300 bps, compounding Year 3 revenue to $138.0M.
SOUNDTHINKING, INC. (SSTI) 3-Scenario DCF Valuation Range
Stress-test SSTI's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Simulate how deploying Gemini workflow automation and autonomous engineering expands SSTI's Gross Margin, FCF Margin, DCF share price, and 2x2 R&D Return Quadrant.
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: $16.44).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $19.98 +22% | $21.21 +29% | $22.64 +38% | $24.34 +48% | $26.37 +60% |
| 9.3% | $17.98 +9% | $18.95 +15% | $20.06 +22% | $21.35 +30% | $22.86 +39% |
| 10.0% | $16.34 -1% | $17.12 +4% | $18.00 +9% | $19.01 +16% | $20.17 +23% |
| 10.8% | $14.96 -9% | $15.60 -5% | $16.31 -1% | $17.12 +4% | $18.03 +10% |
| 11.5% | $13.80 -16% | $14.32 -13% | $14.91 -9% | $15.57 -5% | $16.30 -1% |
Institutional Software Quality Scorecard (41/100 · Grade C)
Weak cash conversion, substantial dilution drag, or constrained financial flexibility.
Negative free cash flow; business consumes cash to sustain operations
Standard software SBC dilution; modest equity transfer to employees
Sub-par gross margins; higher cost of delivery or hardware/services mix
Moderate leverage or cash burn; monitor liquidity runway
Core Investment Strengths & Moats
Key Operational & Dilution Risks
- Negative free cash flow burn of -$1.1M over trailing twelve months
- Lower software gross margins (50.1%), indicating higher hosting or service delivery drag
Audited R&D Intensity is 15.2% of revenue with a -0.09× incremental gross profit return per R&D dollar. Under your current Stage 1 (15.7% CAGR / 50.1% GM) assumptions, SSTI projects to 0.23× R&D Return (Grade CC · Faders).
Reverse-DCF Solver: What Growth is Priced Into SSTI?
The current share price only requires 3.4% 5-year CAGR (15.6% dilution-adjusted), well below historical growth of 15.7%. If the company maintains baseline execution, there is asymmetric upside.
Headline Reverse-DCF ignores Stock-Based Compensation (9.3% of revenue) and annual share dilution (2.4%/yr). Accounting for both requires 15.6% 5-year revenue CAGR to justify $16.44/sh on a true per-share economic cash flow basis.
SOUNDTHINKING, INC. (SSTI) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $98.0M | $98.0M | $113.3M | $131.1M | $151.6M | $175.4M | $202.9M |
| Gross Profit | $49.0M | $49.0M | $56.7M | $65.6M | $75.9M | $87.8M | $101.6M |
| Operating Income (EBIT) | -$16.1M | -$16.1M | -$18.6M | -$21.5M | -$24.9M | -$28.8M | -$33.3M |
| Stock-Based Compensation (SBC) | $9.1M | $9.1M | $10.5M | $12.2M | $14.1M | $16.3M | $18.9M |
| Unlevered Free Cash Flow (FCF) | -$1.1M | -$1.1M | -$1.2M | -$1.4M | -$1.7M | -$1.9M | -$2.2M |
| SBC-Adjusted True Cash Flow | -$10.2M | -$10.2M | -$11.8M | -$13.6M | -$15.8M | -$18.3M | -$21.1M |
Software - Application Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = 6.7 + 0.05 × (Rule of 40) · R² = 12%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 |
|---|---|---|---|---|---|---|---|---|
| SOUNDTHINKING, INC. | SSTI | $215.5M | $98.0M | 50.1% | -1.1% | 14.6% | 9.3% | 2.1× |
| Grab Holdings Limited | GRAB | $20.18B | $2.80B | 42.0% | 27.7% | 84.0% | 10.0% | 6.3× |
| Figma, Inc. | FIG | $18.07B | $749.0M | 88.3% | -9.2% | 39.1% | 126.5% | 23.5× |
| Full Truck Alliance Co. Ltd. | YMM | $71.73B | $11.24B | 86.6% | 25.8% | 70.2% | 4.4% | 5.9× |
| ServiceTitan, Inc. | TTAN | $9.97B | $771.9M | 64.9% | 2.0% | 30.5% | 21.2% | 12.5× |
| InterDigital, Inc. | IDCC | $8.65B | $868.5M | 80.5% | 30.6% | 55.3% | 5.3% | 9.9× |
| OPEN TEXT CORP | OTEX | $8.11B | $5.30B | 63.5% | 13.0% | 23.8% | 2.0% | 2.6× |
| Peer Cohort Median Benchmark (N=6) | 72.7% | 19.4% | 47.2% | 7.6% | 8.1× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 2.1× | $209.1M | $215.5M | $16.44 | 0.0% |
| -20% Multiple Compression | 1.7× | $167.3M | $173.7M | $13.25 | -20.0% |
| -35% Multiple Compression | 1.4× | $135.9M | $142.3M | $10.86 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $489.8M | $496.2M | $37.86 | +134.3% |
Frequently Asked Questions: SOUNDTHINKING, INC. (SSTI) Valuation
What is SOUNDTHINKING, INC. (SSTI)'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, SOUNDTHINKING, INC. (SSTI) has a Base Case implied value of -$1.44 per share (with a Bear Case of -$0.41 and a Bull Case of -$2.77), compared to its current price of $16.44. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is SOUNDTHINKING, INC. (SSTI)'s Rule of 40 score and Free Cash Flow margin?
SOUNDTHINKING, INC. achieves a Rule of 40 score of 14.6%, combining a 15.7% revenue growth run-rate with a -1.1% TTM free cash flow margin on $98.0M in trailing twelve-month revenue. In the Software - Application peer cohort, the median Rule of 40 benchmark is 47.2%.
What revenue growth rate is priced into SSTI stock according to Reverse-DCF analysis?
At $16.44 per share (Enterprise Value of $209.1M), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 3.4%, compared to SOUNDTHINKING, INC.'s historical CAGR of 15.7%. Overall market expectations are rated as "Substantial Margin of Safety".
What is SOUNDTHINKING, INC. (SSTI)'s R&D Return Score and innovation productivity?
On the Golden Door Software R&D Return Benchmark, SOUNDTHINKING, INC. (SSTI) is ranked #160 out of 174 scored software peers, earning a Grade D in the "Faders" quadrant. SOUNDTHINKING, INC. invests 15.2% of FY revenue into R&D ($15.9M) and generated $-0.09 of incremental gross profit per prior-year R&D dollar.
How does SOUNDTHINKING, INC. compare to Software - Application peers?
SOUNDTHINKING, INC. (SSTI) earns an institutional Software Quality Score of 41/100 (Grade C — Capital Intensive / Low Margin). Across its Software - Application peer group (GRAB, FIG, YMM, TTAN, IDCC), the cohort trades at a median EV/TTM Revenue multiple of 8.1× and a median gross margin of 72.7%.
How does Stock-Based Compensation (SBC) impact SOUNDTHINKING, INC. (SSTI)'s valuation?
SOUNDTHINKING, INC. recorded $9.1M in TTM stock-based compensation (9.3% of revenue). When treating SBC as a cash-equivalent compensation expense, SOUNDTHINKING, INC.'s SBC-adjusted free cash flow yield is -4.7%, scoring 16/25 on our Shareholder Dilution Friction pillar.