CrowdStrike Holdings (CRWD)

By both methods, the value today (DCF $58 · Multiples $53) is below the market price ($263).

Today — expensive, no margin of safety: at $263 trades ~400.4% above its value discounted to today (~$53); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$33.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($263) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The price discounts growth (89.3%/year) above our base case (37.0%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$13.8 bn of owner earnings in year 5 (vs ~$2.7 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on FCF maintenance. In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

The valuation metric is owner earnings: operating cash flow net of stock-based compensation less maintenance capex. The netting is not optional. Stock-based compensation equals 23.1% of revenue and 77.3% of reported free cash flow, so valuing on the gross flow would count as owner cash a cost the shareholder pays in dilution: diluted shares rose from 996.7 million in the second quarter of fiscal year 2026 to 1,044.5 million in the same quarter of fiscal year 2027, already restated for the four-for-one split the company made effective after the close on July 1, 2026. For the same reason no share-count path is modeled: the cost of the compensation is already charged inside the metric, and deducting it again in the denominator would double-count it; the net change in shares is dilution, not a reduction. Cash accumulates on that net flow, which in practice approximates what remains after the buyback that offsets the dilution. The 30.5% tax rate is derived from fiscal year 2024, the only one with positive pre-tax income in the XBRL series ($32.2 million of provision on $105.7 million); the effective rate in loss-making years is not representative. Net cash flow after compensation was flat around $0.52 billion between fiscal years 2024 and 2026 while revenue grew from $3.06 to $4.81 billion, and in the twelve months ended July 2026 it rises to $0.77 billion: the first inflection in the series. Year 1 is not taken from the fiscal year but from the rolling twelve-month window: the midpoint of guidance from the August 26, 2026 release — revenue of $5,991.1 to $6,011.1 million for fiscal year 2027, with $1,523.2 to $1,529.2 million guided for the third quarter — sets the second half of fiscal year 2027 at $3,144.6 million, and the first half of fiscal year 2028 is projected with the path's deceleration. Year 0 capex is $407.9 million of property and equipment purchases, 7.56% of revenue against 6.2% the prior year, and the path holds that intensity without extrapolating a decline the filing does not announce. Year 0 depreciation and amortization is computed by levels, TTM = fiscal year 2026 ($250.2 million of property and equipment depreciation plus $31.2 million of intangible amortization, 10-K) plus the first half of fiscal year 2027 ($157.6 million plus $25.7 million, 8-K of Aug 26, 2026) minus the first half of fiscal year 2026 ($116.8 million plus $15.3 million, same 8-K), = $332.6 million; it does not enter the valuation, which is computed on operating cash flow. Net income for the period includes $36.4 million of realized gains on strategic investments and an $18.2 million noncontrolling interest, neither operating: that is why the valuation is computed on cash flow rather than on net income.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $66 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $263, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $66 in 5 years and a required return of 4.5% annually, the maximum to pay today is $53. Against the current market price ($263), the margin of safety is -400.4% (trades above the maximum → a premium is paid) and the total return at that price would be -24.3% annually.

• Multiple on owner earnings. At 476× on cash flow net of stock-based compensation, the entry requires the base case's full margin expansion to occur to justify the price.
• Exit multiple within the band. 25 times, within the enterprise software archetype's 20-30 times band, positioned at the center on account of a wide moat and high terminal growth against a return on capital that does not reach the bar.
• Entry compression. The entry multiple falls to 105× in five years if the base case occurs: growth cheapens the entry on its own.
• No market discount. There is no discount from missing buyers or motivated sellers.
• Estimated return. The base case returns -24% annually and the verdict is Overvalued; the adverse scenario returns -24%.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✕ CFROIC backs up the ROIC (0%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation. Operating cash flow of $2.02 billion in the trailing twelve months, with $530.3 million in the quarter. Net of stock-based compensation it stands at $0.77 billion.
• Return on capital. Negative on a GAAP basis, with invested capital of just $0.87 billion. It sits below the 10% bar, though the metric says more about the stock compensation charge than about the economics of the business.
• Reinvestment runway. 33 active modules and a market expanding toward identity, cloud, and artificial intelligence; cross-selling within the installed base is the cheapest runway there is.
• Working capital in its favor. The subscription is billed in advance, so growth self-funds through prepaid collections instead of consuming capital.
• Quality of GAAP earnings. GAAP operating income was negative in the last four fiscal years and the accumulated deficit reaches $1.3 billion; cash conversion depends on prepaid collections, not on margin.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

This business's drivers are subscription-based: annual recurring revenue and its net new addition measure the contracted flow that has not yet appeared in the income statement, net dollar retention measures how much an already-won customer's spend expands, and module adoption — 51% of customers with six or more as of July 31, 2026 — measures the depth of that expansion. Annual recurring revenue leads recognized revenue, so it anchors the projection to signed contract rather than extrapolated trend. Stock-based compensation as a share of revenue is tracked as a driver because in this business it determines how much of operating cash flow is left for the owner.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (31-jul-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Contracted growth. Annual recurring revenue grows 24% and the quarter's net new figure was a record at 32% year over year: growth is signed before it is recognized.
• Raised guidance. The company raised its fiscal year 2027 net new annual recurring revenue growth expectation by 630 basis points, to 34% at the midpoint, an acceleration over the prior fiscal year.
• Expansion within the base. Net dollar retention from 112% to 115% and module adoption at 51% with six or more, 35% with seven or more, and 25% with eight or more.
• Deceleration of recognized revenue. Growth fell from 36.3% to 29.4% to 21.7% over three fiscal years, with 23.2% over the trailing twelve months: the path is decelerating even as recurring revenue holds up.
• Geographic diversification. International revenue grew 26% to $1,595.4 million, above the consolidated rate.

• Revenue recurrence. 95% of revenue is subscription, with annual recurring revenue of $5.84 billion and net dollar retention of 115%.
• Ten-year relevance. Cybersecurity spending is non-discretionary and grows with the attack surface; 82% of 2025 detections did not use malware, which shifts spending toward identity and behavior.
• Differentiated product. Single-sensor architecture that adds modules without new agents. The company states that no competitor currently offers an equivalent platform.
• Pricing power. Expansion occurs through module cross-selling more than through price increases, and after the July 19 incident the company had to grant subscription extensions, discounts, and promotional modules.
• Operating leverage. It exists but has not yet reached the shareholder: non-GAAP operating income rose from $201.1 to $325.7 million between first quarters while cash flow net of stock-based compensation stayed flat for three fiscal years.
• Recession behavior. No track record of its own through a recession; the security budget is defensive, but enterprise sales cycles lengthen when technology spending tightens.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $4.3 bn
• –Interest coverage (EBIT / interest)no data
• –Liquidity (current ratio)no data
• –Cash quality (CFROIC vs ROIC)ROIC ≤ 0 (see value creation)
• ✕Value creation (ROIC − 10% bar)-21pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.2x
• –Float / working capitalNeutral WC
• ✕Dilution (SBC % of revenue + shares)SBC 23.1% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Net cash. Cash and liquid investments of $5.01 billion against debt of $0.75 billion: net cash of $4.27 billion.
• Leverage. Debt equals 16% of equity and is covered six times by cash; there is no refinancing risk.
• Capital intensity. Capex was $314 million over the trailing twelve months, 6.2% of revenue: growth does not require heavy fixed assets.
• Open contingencies. Securities litigation, derivative lawsuits, class actions, and official inquiries related to the July 19 incident, with insurance coverage stated to be insufficient.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

The company does not pay a dividend. Over the trailing twelve months the observable uses of the $2.02 billion of operating cash flow were business acquisitions net of cash acquired of $1,264 million, capex of $408 million, and share buybacks of $175.6 million. Cash was not retained: in the first quarter of fiscal year 2027, the quarter that concentrated the $881.4 million acquisition, cash fell $598.9 million (from $5,314.6 to $4,715.7 million). The split shown reflects that observed proportion: acquisitions first, reinvestment in product second, and buybacks last. The buyback does not offset the dilution from stock-based compensation, so the share count keeps rising.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Founder at the helm. George Kurtz is co-founder and chief executive officer since November 2011, with prior experience as worldwide chief technology officer of McAfee and founder of Foundstone.
• Team continuity. The chief financial officer has held the role since 2015 and the president since 2023, after three years as chief technology officer. It is a stable team with deep product knowledge.
• Capital allocation. No dividend; capital goes to product reinvestment and complementary acquisitions, with a $175.6 million buyback in the first quarter of fiscal 2027 insufficient to offset compensation-driven issuance.
• Shareholder dilution. Diluted shares rose from 996.7 million in the second quarter of fiscal year 2026 to 1,044.5 million in the same quarter of fiscal year 2027, nearly 5% dilution in a year, with stock-based compensation held at 23.1% of revenue.
• Candor about mistakes. The annual report documents the July 19 incident in detail, including the adverse commercial effects, the open litigation, and the acknowledgment that insurance will not cover all the costs.

• The market values reported free cash flow, which adds stock-based compensation back: on that basis the business looks much cheaper than it turns out to be once that cost is charged
• Annual recurring revenue growth is contracted and verifiable, and the acceleration in net new revenue guided for fiscal 2027 supports paying for future growth rather than present cash
• The recovery following the July 19 incident is visible in net retention and module adoption, which sustains the perception that the damage was transitory
• GAAP operating income is improving fast — from a loss of $118.7 million to a loss of $30.6 million between first quarters — anticipating the operating leverage the price already discounts

There is no discount to explain: the price already prices in the full margin expansion. All figures are on a post-split basis (4-for-1 split effective July 1, 2026). The gap between perception and reality, if it exists, points in the opposite direction from usual: the market measures this business by a flow that adds back a real cost of 23.1% of revenue. Once that cost is charged, today's entry is 476× and the estimated base-case return is -24% annually, sustained by a margin expansion that has not yet shown up in owner cash flow.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -35%/year (-88% total): the margin of safety protects the downside. The bull (-17%/year, -62% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Aftereffects of the July 19 incident. An additional $82.4 million of general expenses in fiscal 2026 and commercial effects the company states are ongoing: deferred purchases, incentives granted, and competitors approaching customers and partners.
• Sustained stock-based compensation. 23.1% of revenue and 77.3% of reported free cash flow, with no downward trend in the last three fiscal years or in the trailing twelve months (it was 23.5% in fiscal year 2023). This is the line the entire thesis depends on.
• GAAP profitability not yet achieved. Losses in three of the last four fiscal years and an accumulated deficit of $1.3 billion; the company states it cannot ensure when it will achieve sustained profitability.
• Fragmented competition. Seven categories of competitors, several with more resources and broader customer bases, and the possibility they incorporate artificial intelligence more successfully.
• Product risk. A defect not detected until after deployment damages the brand disproportionately because the product is protection itself; it has already happened once at global scale.
• Attack target. By its role, the company is a specific target of sophisticated adversaries seeking to use it as an entry point into its customers' networks, and it acknowledges that eliminating that risk is virtually impossible.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC -11% does not clear the 10% bar.

• Peter Lynch Growth at a reasonable price (GARP)

  A hyper-growth growing 37% at a multiple/growth of 12.9 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  ROIC -11%; earnings yield not computable (EBIT or EV not positive).

• Howard Marks Perception vs reality + cycle

  The price discounts 89% vs our 37%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -35%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: network effects, switching costs, efficient scale, intangibles → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price demands 89% growth, far above our 37% — heroic assumptions.