Bailey Pemberton
4 min read
Bentley Systems has surged over the past month, which puts a fresh spotlight on whether the current share price lines up with the cash flows the business is expected to generate. With the stock back in focus after a weaker longer term return profile, the question now is what investors are really paying for in terms of future cash generation.
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The share price has climbed 31.6% over the past month, so anyone buying today is effectively underwriting a very different cash flow outlook than they were just a few weeks ago.
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Bentley Systems recently announced that subsidiary Seequent is acquiring seismic interpretation software company Eliis, a move that can influence future cash flows by affecting how quickly the group can convert new subsurface software capabilities into revenue and investment needs.
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Prefer to judge Bentley Systems on earnings? See why Bentley Systems’s 45.4x P/E tells a different valuation story.
For investors, the debate is whether Bentley Systems’ recent share price strength is adequately supported by the cash flows implied by its intrinsic value estimate under the Discounted Cash Flow (DCF) approach.
If you want a wider set of ideas while you weigh Bentley Systems’ cash flow story and the Eliis deal, a focused stock screen built around 34 high quality undervalued stocks can be a useful second starting point for research.
Does Bentley Systems Look Fairly Valued on Cash Flow?
The Discounted Cash Flow (DCF) model here is built around Bentley Systems’ ability to generate and grow free cash flow over time. On the latest twelve-month view, the group produced around $500.8 million of free cash flow, and the projections used in the DCF point to this cash generation continuing to grow rather than shrink. Those estimates assume that free cash flow steps up over the coming decade, then settles into a steadier pattern in the later years of the model.
With the current share price at $42.40, the DCF output suggests Bentley Systems’ estimated intrinsic value is broadly in line with where the market is trading today. Because Seequent’s acquisition of Eliis adds more subsurface software capabilities to the group, the Eliis deal helps explain why investors might accept a price that already reflects meaningful long term cash flow expectations. To see how the full DCF compares with the latest price in more detail, follow through to the intrinsic value calculation. Find out what Bentley Systems could be worth using our Discounted Cash Flow (DCF) estimate.
The Bentley Systems Narrative: What Would Justify Today’s Price?
