What is FALC's Intrinsic value?

FalconStor Software Inc (FALC) Intrinsic Value Analysis

Executive Summary

As of June 7, 2025, FalconStor Software Inc's estimated intrinsic value ranges from $1.34 to $1.34 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Earnings Power Value $1.34 +14.8%

Is FalconStor Software Inc (FALC) undervalued or overvalued?

With the current market price at $1.17, the stock appears to be moderately undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate FalconStor Software Inc's intrinsic value, including:

  1. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.48 0.55
Cost of equity 6.1% 7.9%
Cost of debt 6.1% 7.0%
Tax rate 25.9% 36.2%
Debt/Equity ratio 0.27 0.27
After-tax WACC 5.7% 7.2%

Valuation Methods

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $1M
Discount Rate (WACC) 7.2% - 5.7%
Enterprise Value $9M - $11M
Net Debt $0M
Equity Value $8M - $11M
Outstanding Shares 7M
Fair Value $1 - $1
Selected Fair Value $1.34

Key Financial Metrics

Metric Value
Market Capitalization $8M
Enterprise Value $9M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 9.70
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.27

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Earnings Power Value 100% $0.13
Weighted Average 100% $1.34

Investment Conclusion

Based on our comprehensive valuation analysis, FalconStor Software Inc's weighted average intrinsic value is $1.34, which is approximately 14.8% above the current market price of $1.17.

Key investment considerations:

  • Strong projected earnings growth (-18% to -8% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.27)

Given these factors, we believe FalconStor Software Inc is currently moderately undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.