Pinned valuation:
Based on the ARR multiple methodology using Objective Corporation's FY2025 annual report data:
Share Price Valuations Calculated
Bear Case (12x ARR): $16.13
Fair Value (16x ARR): $21.16
Bull Case (21x ARR): $25.40
Methodology:
ARR FY2025: $120.2M
Shares Outstanding: 95.6M
Cash: $99.2M
No Debt
Valuation Rationale:
Rule of 40 Score: 54.1% (15.1% ARR growth + 39% EBITDA margin)
Score justifies premium multiples versus typical SaaS companies.
Other Factors Supporting Higher Multiples:
84% recurring revenue with 100% subscription software
Mission-critical government software with high switching costs
Profitable growth during SaaS transition
Strong R&D investment (30% of revenue)
Debt-free with significant cash position
Growth Catalysts:
33 on-premise customers remaining for conversion (1.5-2.5x ARR uplift each)
Scottish Government migration validating cloud strategy
Australian expansion of Objective Build
AI integration creating competitive moats
Does anyone have a different take on valuation for OCL? Running valuation based on ARR multiples gives a share price around what it is currently, but the DCF method gives the below:
On FY25 numbers, OCL is doing $120m ARR with 39% EBITDA margins. Assuming 15% top-line growth tapering to 8%, margins around 42%, and a 10% discount rate, I get a DCF value of around $9.60/share as a base case. Even with more bullish growth assumptions the number only stretches into the low teens.
I’m having trouble reconciling the two valuation methods and working out which way to go, or whether I just take an average of the two methods as my safe fair value. I’m thinking the disconnect could also be the side effect of a generally peaky/optimistic overall market sentiment.
Would love to get some opinions from other Strawpeople more familiar with valuing SaaS companies that are at a similar stage in their business lifecycle.
I am not sure if the earnings deserved the outsized share price reaction (though I haven't reviewed the details on the call, maybe there are some encouraging catalysts there), but it is nice to have another large position of mine move in a positive direction, hot on the heels of the likes of FID and EOL this week.