TYLER TECHNOLOGIES INC (TYL) DCF Valuation & Fundamental Primer
TYLER TECHNOLOGIES INC (TYL) currently trades at $435.84 with an enterprise value of $10.18B. Our proprietary institutional model rates TYLER TECHNOLOGIES INC at 76/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 22.8% vs. historical growth of 7.5% (Aggressive Growth Expectations Priced In).
Institutional fundamental teardown of Tyler Technologies (TYL) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
TYLER TECHNOLOGIES INC (TYL) 3-Scenario DCF Valuation Range
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 202% of EBIT driven by upfront annual collections
- Net cash positive: $190.7M balance sheet buffer
Key Operational & Dilution Risks
- Lower software gross margins (41.0%), indicating higher hosting or service delivery drag
Reverse-DCF Solver: What Growth is Priced Into TYL?
The current share price demands 22.8% 5-year CAGR—a +15.3% acceleration over historical run-rate (7.5%). Any growth slowdown risks valuation multiple contraction.
TYLER TECHNOLOGIES INC (TYL) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $2.14B | $2.14B | $2.30B | $2.47B | $2.66B | $2.85B | $3.07B |
| Gross Profit | $876.1M | $876.1M | $941.7M | $1.01B | $1.09B | $1.17B | $1.26B |
| Operating Income (EBIT) | $299.5M | $299.5M | $321.9M | $346.1M | $372.0M | $399.8M | $429.8M |
| Stock-Based Compensation (SBC) | $122.8M | $122.7M | $131.9M | $141.8M | $152.4M | $163.8M | $176.1M |
| Unlevered Free Cash Flow (FCF) | $604.1M | $604.1M | $649.4M | $698.0M | $750.3M | $806.5M | $866.9M |
| SBC-Adjusted True Cash Flow | $481.3M | $481.4M | $517.5M | $556.3M | $597.9M | $642.7M | $690.8M |
Software & Cloud Services Peer Comparables Matrix
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| TYLER TECHNOLOGIES INC | TYL | $18.75B | $2.14B | 41.0% | 28.3% | 35.8% | 5.7% | 8.7× |
| ServiceNow, Inc. | NOW | $192.40B | $10.98B | 79.5% | 31.5% | 54.0% | 15.8% | 17.2× |
| Workday, Inc. | WDAY | $38.74B | $2.98B | 74.9% | 20.8% | 41.1% | 17.1% | 12.5× |
| Salesforce, Inc. | CRM | $307.82B | $37.90B | 76.8% | 32.4% | 43.4% | 8.4% | 8.0× |
| Datadog, Inc. | DDOG | $45.58B | $2.68B | 81.2% | 28.5% | 55.0% | 20.4% | 16.1× |
| Snowflake Inc. | SNOW | $54.93B | $3.62B | 74.0% | 26.0% | 54.0% | 34.5% | 14.7× |
| HubSpot, Inc. | HUBS | $38.18B | $4.76B | 83.4% | 16.9% | 38.8% | 10.9% | 7.4× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 27.3% | 48.7% | 16.4% | 13.6× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 8.7× | $18.56B | $18.75B | $435.84 | 0.0% |
| -20% Multiple Compression | 6.9× | $14.85B | $15.04B | $349.56 | -20.0% |
| -35% Multiple Compression | 5.6× | $12.07B | $12.26B | $284.85 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $10.69B | $10.88B | $252.85 | -42.4% |
Frequently Asked Questions: TYLER TECHNOLOGIES INC (TYL) Valuation
What is TYLER TECHNOLOGIES INC (TYL)'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, TYLER TECHNOLOGIES INC (TYL) has a Base Case implied value of $240.95 per share (with a Bear Case of $135.17 and a Bull Case of $363.01), compared to its current price of $435.84. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is TYLER TECHNOLOGIES INC (TYL)'s Rule of 40 score and Free Cash Flow margin?
TYLER TECHNOLOGIES INC achieves a Rule of 40 score of 35.7%, combining a 7.5% revenue growth run-rate with a 28.3% TTM free cash flow margin on $2.14B in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 48.7%.
What revenue growth rate is priced into TYL stock according to Reverse-DCF analysis?
At $435.84 per share (Enterprise Value of $18.56B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 22.8%, compared to TYLER TECHNOLOGIES INC's historical CAGR of 7.5%. Overall market expectations are rated as "Aggressive Growth Expectations Priced In".
How does TYLER TECHNOLOGIES INC compare to Software & Cloud Services software peers?
TYLER TECHNOLOGIES INC (TYL) 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 13.6× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact TYLER TECHNOLOGIES INC (TYL)'s valuation?
TYLER TECHNOLOGIES INC recorded $122.8M in TTM stock-based compensation (5.7% of revenue). When treating SBC as a cash-equivalent compensation expense, TYLER TECHNOLOGIES INC's SBC-adjusted free cash flow yield is 2.6%, scoring 21/25 on our Shareholder Dilution Friction pillar.