Telos Corporation (TLS) DCF Valuation & Fundamental Primer
Telos Corporation (TLS) trades at $5.50 with a market enterprise value of $375.9M and generated $193.7M in TTM revenue and $33.7M in free cash flow (filed 2026-08-10 (period ended 2026-06-30)). Our 5-year DCF model estimates an implied intrinsic value of $4.20 per diluted share ($275.2M DCF enterprise value, Grade: B · 59/100 · Mixed Fundamental Profile).
SEC 10-K/10-Q DCF teardown of Telos Corporation (TLS): $193.7M TTM revenue (-9.2% growth), 36.6% GAAP gross margin, 17.4% FCF margin, 11.1% SBC/revenue, and Rule of 40 score of 8.2%.
Telos Corporation (TLS) earns a "Pass" rating and an institutional Quality Score of 59/100 (Grade B). On $193.7M in baseline revenue (-9.2% growth, 36.6% gross margin, 17.4% FCF margin), our 5-year DCF yields an Enterprise Value of $275.2M ($4.20/share vs. $5.50 market price). On the R&D Return Benchmark, TLS ranks #4 of 174 (Harvesters · Grade AAA, 3.15× return).
Gross Margin & Unit Economics: Telos Corporation operates at a 36.6% gross margin on $193.7M revenue (35.8 pts below the Software - Infrastructure median of 72.4%).
R&D Productivity (Harvesters · Grade AAA): Investing 4.3% of revenue in R&D ($7.1M) generates $3.15 of incremental gross profit per R&D dollar (Rank #4 of 174).
Rule of 40 & Cash Conversion: Combining -9.2% top-line growth with 17.4% FCF margin yields a 8.2% Rule of 40 score (vs. 38.4% cohort median) and $275.2M DCF Enterprise Value.
3-Statement Financial Schedule & 5-Year Horizon
Synchronized directly with the 3-Year Operating Statement (36.6% Gross Margin · -9.2% Growth)
| Income Statement Line | Year 1 (2026) | Year 2 (2027) | Year 3 (2028) |
|---|---|---|---|
| Revenue | $193.7M | $175.9M | $159.7M |
| Cost of Revenue (COGS) | ($122.7M) | ($110.6M) | ($99.6M) |
| Gross Profit & Margin | $71.0M (36.6%) | $65.3M (37.1%) | $60.1M (37.6%) |
| Research & Development (R&D) | $6.7M | $8.4M | $7.3M |
| Sales & Marketing (S&M) | $60.1M | $52.4M | $45.6M |
| General & Administrative (G&A) | $23.4M | $20.4M | $17.7M |
| Operating EBIT | -$19.2M (-9.9%) | -$15.9M (-9.1%) | -$10.6M (-6.6%) |
| Adjusted EBITDA | -$5.8M (-3.0%) | -$3.8M (-2.1%) | $457K (0.3%) |
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 36.6% to 41.6%.
Align R&D intensity and ASC 350-40 capitalization to the R&D Compounders cohort median, recapturing $3.9M in annual EBITDA.
Lift net dollar retention and expansion velocity by +300 bps, compounding Year 3 revenue to $170.4M.
Telos Corporation (TLS) 3-Scenario DCF Valuation Range
Stress-test TLS'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 TLS'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: $5.50).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $4.55 -17% | $4.77 -13% | $5.02 -9% | $5.31 -3% | $5.66 +3% |
| 9.3% | $4.20 -24% | $4.37 -21% | $4.56 -17% | $4.78 -13% | $5.05 -8% |
| 10.0% | $3.91 -29% | $4.04 -26% | $4.20 -24% | $4.37 -21% | $4.57 -17% |
| 10.8% | $3.67 -33% | $3.78 -31% | $3.90 -29% | $4.04 -27% | $4.20 -24% |
| 11.5% | $3.46 -37% | $3.55 -35% | $3.65 -34% | $3.76 -32% | $3.89 -29% |
Institutional Software Quality Scorecard (59/100 · Grade B)
Viable recurring software business but carries notable dilution, lower margins, or higher leverage.
Positive FCF but lower conversion efficiency due to capex or timing
Standard software SBC dilution; modest equity transfer to employees
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
- Net cash positive: $50.6M balance sheet buffer
Key Operational & Dilution Risks
- Lower software gross margins (36.6%), indicating higher hosting or service delivery drag
Audited R&D Intensity is 4.3% of revenue with a 3.15× incremental gross profit return per R&D dollar. Under your current Stage 1 (-9.2% CAGR / 36.6% GM) assumptions, TLS projects to -0.88× R&D Return (Grade D · Faders).
Reverse-DCF Solver: What Growth is Priced Into TLS?
Market implies -2.2% annual revenue growth over next 5 years (9.8% dilution-adjusted), in line with company run-rate.
Headline Reverse-DCF ignores Stock-Based Compensation (11.1% of revenue) and annual share dilution (2.2%/yr). Accounting for both requires 9.8% 5-year revenue CAGR to justify $5.50/sh on a true per-share economic cash flow basis.
Telos Corporation (TLS) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $193.7M | $193.7M | $175.9M | $159.7M | $145.0M | $131.7M | $119.6M |
| Gross Profit | $71.0M | $71.0M | $64.4M | $58.5M | $53.1M | $48.2M | $43.8M |
| Operating Income (EBIT) | -$19.2M | -$19.2M | -$17.4M | -$15.8M | -$14.4M | -$13.1M | -$11.9M |
| Stock-Based Compensation (SBC) | $21.5M | $21.5M | $19.5M | $17.7M | $16.1M | $14.6M | $13.3M |
| Unlevered Free Cash Flow (FCF) | $33.7M | $33.7M | $30.6M | $27.8M | $25.3M | $22.9M | $20.8M |
| SBC-Adjusted True Cash Flow | $12.2M | $12.2M | $11.1M | $10.1M | $9.2M | $8.3M | $7.5M |
Software - Infrastructure Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = 6.5 + 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 |
|---|---|---|---|---|---|---|---|---|
| Telos Corporation | TLS | $426.5M | $193.7M | 36.6% | 17.4% | 8.2% | 11.1% | 1.9× |
| Block, Inc. | XYZ | $41.67B | $25.04B | 46.4% | 15.5% | 23.7% | 4.8% | 1.6× |
| CoreWeave, Inc. | CRWV | $35.80B | $1.92B | 74.2% | -80.0% | 0.0% | 1.6% | 23.5× |
| VeriSign, Inc. | VRSN | $22.52B | $1.56B | 87.7% | 56.1% | 61.5% | 3.9% | 15.5× |
| CORPAY, INC. | CPAY | $22.17B | $3.97B | 78.1% | 44.4% | 52.1% | 2.9% | 7.2× |
| NetApp, Inc. | NTAP | $21.02B | $7.39B | 70.6% | 22.3% | 24.6% | 5.4% | 3.0× |
| Joint Stock Co Kaspi.kz | KSPI | $11,481.85B | $2,520.93B | 62.3% | 19.3% | 59.8% | — | 4.4× |
| Peer Cohort Median Benchmark (N=6) | 72.4% | 20.8% | 38.4% | 3.9% | 5.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 1.9× | $375.9M | $426.5M | $5.50 | 0.0% |
| -20% Multiple Compression | 1.6× | $300.7M | $351.3M | $4.53 | -20.0% |
| -35% Multiple Compression | 1.3× | $244.3M | $295.0M | $3.80 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $968.5M | $1.02B | $13.14 | +157.7% |
Frequently Asked Questions: Telos Corporation (TLS) Valuation
What is Telos Corporation (TLS)'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, Telos Corporation (TLS) has a Base Case implied value of $4.20 per share (with a Bear Case of $3.52 and a Bull Case of $4.71), compared to its current price of $5.50. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Telos Corporation (TLS)'s Rule of 40 score and Free Cash Flow margin?
Telos Corporation achieves a Rule of 40 score of 8.2%, combining a -9.2% revenue growth run-rate with a 17.4% TTM free cash flow margin on $193.7M in trailing twelve-month revenue. In the Software - Infrastructure peer cohort, the median Rule of 40 benchmark is 38.4%.
What revenue growth rate is priced into TLS stock according to Reverse-DCF analysis?
At $5.50 per share (Enterprise Value of $375.9M), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of -2.2%, compared to Telos Corporation's historical CAGR of -9.2%. Overall market expectations are rated as "Fairly Priced to Fundamentals".
What is Telos Corporation (TLS)'s R&D Return Score and innovation productivity?
Telos Corporation (TLS) recorded $7.1M in FY R&D expense (4.3% of revenue). Prior-year R&D is below the $10M ranking floor, so R&D Return is marked below R&D floor. The name still carries a fundamentals-only Buy/Watch/Pass grade.
How does Telos Corporation compare to Software - Infrastructure peers?
Telos Corporation (TLS) earns an institutional Software Quality Score of 59/100 (Grade B — Mixed Fundamental Profile). Across its Software - Infrastructure peer group (XYZ, CRWV, VRSN, CPAY, NTAP), the cohort trades at a median EV/TTM Revenue multiple of 5.8× and a median gross margin of 72.4%.
How does Stock-Based Compensation (SBC) impact Telos Corporation (TLS)'s valuation?
Telos Corporation recorded $21.5M in TTM stock-based compensation (11.1% of revenue). When treating SBC as a cash-equivalent compensation expense, Telos Corporation's SBC-adjusted free cash flow yield is 2.9%, scoring 16/25 on our Shareholder Dilution Friction pillar.