SolarWinds Corporation (SWI) DCF Valuation & Fundamental Primer
SolarWinds Corporation (SWI) currently trades at $18.49 with an enterprise value of $1.72B. Our proprietary institutional model rates SolarWinds Corporation at 71/100 (Grade: B+ · Quality Software Operator). The current market price prices in an implied 5-year revenue CAGR of 7.0% vs. historical growth of -6.0% (Aggressive Growth Expectations Priced In).
Institutional fundamental teardown of SolarWinds Corporation (SWI) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
SolarWinds Corporation (SWI) 3-Scenario DCF Valuation Range
Stress-test SWI'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: $18.49).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $12.06 -35% | $12.67 -31% | $13.38 -28% | $14.23 -23% | $15.25 -18% |
| 9.3% | $11.04 -40% | $11.52 -38% | $12.08 -35% | $12.72 -31% | $13.48 -27% |
| 10.0% | $10.20 -45% | $10.59 -43% | $11.03 -40% | $11.54 -38% | $12.12 -34% |
| 10.8% | $9.50 -49% | $9.82 -47% | $10.18 -45% | $10.58 -43% | $11.04 -40% |
| 11.5% | $8.90 -52% | $9.17 -50% | $9.46 -49% | $9.79 -47% | $10.16 -45% |
Institutional Software Quality Scorecard (71/100 · Grade B+)
Solid software model with clear operating leverage, partially offset by standard SBC or moderate burn.
Solid cash generation with minor working capital absorption
Standard software SBC dilution; modest equity transfer to employees
Solid gross margins with potential for operating leverage at scale
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- Net cash positive: $190.1M balance sheet buffer
Key Operational & Dilution Risks
Reverse-DCF Solver: What Growth is Priced Into SWI?
The current share price demands 7.0% 5-year CAGR (14.3% net of SBC & dilution)—a +12.9% acceleration over historical run-rate (-6.0%). Any growth slowdown risks valuation multiple contraction.
Headline Reverse-DCF ignores Stock-Based Compensation (9.6% of revenue) and annual share dilution (1.2%/yr). Accounting for both requires 14.3% 5-year revenue CAGR to justify $18.49/sh on a true per-share economic cash flow basis.
SolarWinds Corporation (SWI) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $796.9M | $796.9M | $749.3M | $704.6M | $662.5M | $623.0M | $585.8M |
| Gross Profit | $713.6M | $713.6M | $671.0M | $631.0M | $593.3M | $557.9M | $524.6M |
| Operating Income (EBIT) | $208.4M | $208.4M | $195.9M | $184.2M | $173.2M | $162.9M | $153.2M |
| Stock-Based Compensation (SBC) | $76.5M | $76.4M | $71.9M | $67.6M | $63.5M | $59.7M | $56.2M |
| Unlevered Free Cash Flow (FCF) | $182.7M | $182.6M | $171.7M | $161.5M | $151.9M | $142.8M | $134.3M |
| SBC-Adjusted True Cash Flow | $106.2M | $106.2M | $99.9M | $93.9M | $88.3M | $83.0M | $78.1M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -5.0 + 0.34 × (Rule of 40) · R² = 59%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 |
|---|---|---|---|---|---|---|---|---|
| SolarWinds Corporation | SWI | $3.20B | $796.9M | 89.5% | 22.9% | 17.0% | 9.6% | 3.8× |
| 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 | 3.8× | $3.01B | $3.20B | $18.49 | 0.0% |
| -20% Multiple Compression | 3.0× | $2.41B | $2.60B | $15.01 | -20.0% |
| -35% Multiple Compression | 2.5× | $1.96B | $2.15B | $12.40 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $3.98B | $4.17B | $24.11 | +32.3% |
Frequently Asked Questions: SolarWinds Corporation (SWI) Valuation
What is SolarWinds Corporation (SWI)'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, SolarWinds Corporation (SWI) has a Base Case implied value of $11.06 per share (with a Bear Case of $8.53 and a Bull Case of $13.19), compared to its current price of $18.49. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is SolarWinds Corporation (SWI)'s Rule of 40 score and Free Cash Flow margin?
SolarWinds Corporation achieves a Rule of 40 score of 17.0%, combining a -6.0% revenue growth run-rate with a 22.9% TTM free cash flow margin on $796.9M 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 SWI stock according to Reverse-DCF analysis?
At $18.49 per share (Enterprise Value of $3.01B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 7.0%, compared to SolarWinds Corporation's historical CAGR of -6.0%. Overall market expectations are rated as "Aggressive Growth Expectations Priced In".
How does SolarWinds Corporation compare to Software & Cloud Services software peers?
SolarWinds Corporation (SWI) earns an institutional Software Quality Score of 71/100 (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 SolarWinds Corporation (SWI)'s valuation?
SolarWinds Corporation recorded $76.5M in TTM stock-based compensation (9.6% of revenue). When treating SBC as a cash-equivalent compensation expense, SolarWinds Corporation's SBC-adjusted free cash flow yield is 3.3%, scoring 16/25 on our Shareholder Dilution Friction pillar.