APPFOLIO INC (APPF) stock intrinsic value fair value estimate & owner earnings analysis

AppFolio sells cloud software and payment/screening services to residential and commercial property managers, mostly in the United States. Revenue has grown every year since 2016 (about $106M then, $951M in 2025, and about +20% in the first half of 2026). The business is now solidly cash-generating: after deducting working-capital swings, stock-based compensation (a real cost, about $71M in 2025) and maintenance investment, owner earnings were about $5.31 per share in 2025 and $4.09 in 2024, versus roughly break-even or negative in 2020-2022 when the company was spending heavily on capitalized software and stock pay rose sharply. We treat the business as transformed from 2023 onward and anchor on the median of 2023-2025, about $4.09 per share. That is deliberately below 2025 because cash taxes ($28.8M in 2025) are running well below book taxes: the company is drawing down $146.8M of federal loss carryforwards and $36M of R&D credits, which will run out and push cash taxes up. Owner earnings grew about 30% in 2025; the base case assumes only about 8-10% in year one, tapering to about 1% by year ten, because we credit only the steady growth in customers, units and services that the company has delivered for ten years, not new products or share gains. After year ten the base case holds earnings flat for another decade on the strength of sticky, mission-critical property-management software, and then fades to zero. Base value is roughly $80 per share. The bear case assumes owner earnings settle near $3.20 with no growth (cash taxes normalizing, stock pay continuing to rise, working capital absorbing cash) and then fade over the second decade: roughly $30. The bull case starts from the 2025 level of $5.31 and lets growth run 20% tapering to 2% over ten years, in line with recent revenue growth and first-half 2026 cash flow (+34%): roughly $140. Capitalized software (about $3-5M a year recently) is treated as growth investment by our formula, which is small relative to earnings. The company has no borrowings on its credit facility. What would make this wrong: a step-up in cash taxes larger than expected, a slowdown in unit growth or pricing of value-added services, or stock compensation continuing to outgrow earnings. We could not reconcile all of the noncash lines beyond the cash-flow statement itself for FY2016, so the series starts in 2017.