BENTLEY SYSTEMS INC (BSY) stock intrinsic value fair value estimate & owner earnings analysis

Bentley Systems designs, develops and markets software used by engineers, architects and infrastructure owners to plan, design, build and operate large infrastructure assets - roads, rail, water systems, utilities, buildings and industrial plants. Its core products (MicroStation, OpenRoads, OpenBuildings, STAAD, ProjectWise) are sold mostly on subscription, and its iTwin platform extends that into digital twins used by asset owners after construction, alongside AssetWise for ongoing operations. Revenue is heavily subscription-based, with a long history of high renewal rates because the software becomes embedded in a firm's design standards and workflows. Bentley trades on Nasdaq as BSY; that is the Class B common stock. A small Class A share class, held mainly by the Bentley family and insiders, carries additional voting control but is not separately listed, and Bentley reports earnings per share on a combined, two-class basis, which we followed here. We build our estimate of value from owner earnings: the cash the business generates after stripping out working-capital swings, stock-based compensation, and the capital spending needed just to keep the business running (as opposed to capital spent to grow it). Over the last five fiscal years, owner earnings per share were $0.66 (2021), $0.60 (2022), $0.67 (2023), $0.98 (2024) and $1.17 (2025) - a business that has clearly gotten better at converting revenue into owner earnings, mainly because capital spending has shrunk as a share of revenue and cash flow has benefited from a fast-growing pool of prepaid cloud-subscription deposits. We used the median of this five-year run, $0.67 per share, as our starting point rather than the most recent (highest) year: two years above $0.90 is not yet enough of a track record to call that the new normal, and cash flow in the first half of 2026 actually came in below the first half of 2025 even as revenue kept growing, a sign that part of the recent surge reflects unusually light capital spending and favorable cash timing that may not repeat every year. Our base case assumes owner earnings grow 12% in year one - below the 20% actual growth rate posted in 2025, because we think part of that growth was a temporary boost from unusually low capital spending and favorable payment timing - decelerating gradually to 6% by year ten, broadly tracking the steady low-double-digit revenue growth Bentley has posted for years. Beyond year ten, we assume Bentley's subscription base, which renews itself through research and development that is already charged against earnings, continues to produce cash flow that grows only slightly (about half a percent a year), given the eventual maturing of its core markets and real competition from larger rivals such as Autodesk, Hexagon and Trimble. That assumption for the years beyond the ten-year forecast accounts for roughly two-thirds of the total estimated value, which is typical for a durable, capital-light software franchise, but means the valuation leans heavily on Bentley's software remaining embedded in customers' workflows for a long time. On that basis, we estimate the shares are worth around $23.85 today. Our bear case (roughly a one-in-ten outcome) assumes owner earnings actually shrink for the first two years, driven by softer public infrastructure spending as post-stimulus budgets tighten, continued weakness in China and the broader Asia-Pacific region (which the company's own 2025 filings describe as essentially flat, with subscription revenue there declining among existing accounts), and margin pressure from the roughly $575 million of convertible notes Bentley must refinance by 2027, likely at a higher interest cost - before stabilizing at a modest 2% annual growth rate with no further real growth after year ten. That produces a value of about $11.34 per share: the business would still be worth a meaningful amount, not nothing, even under a materially worse outcome. Our bull case (roughly a one-in-ten better outcome) assumes Bentley's digital-twin platform gains adoption faster than expected among infrastructure owners moving from one-time design work into ongoing digital operations, that recent acquisitions integrate well and lift customer retention, and that the recent improvement in capital efficiency holds rather than reverting to older, higher levels. Owner earnings would grow around 18% in year one, decelerating to 10% by year ten, with 1% real growth continuing after that. That produces a value of about $36.25 per share; in this case more than two-thirds of the value rests on that long growing tail, which is a genuinely optimistic and less certain assumption. Given the size of the gap between our bear and base cases, the margin-of-safety price is set at a meaningful discount to our estimate of fair value - around $15.27 per share, roughly 36% below our base-case estimate. That is not a mechanical discount: it reflects that some of Bentley's more modest historical growth years (2021-2022) sit inside the same recent window we used to set our starting point, and that a real slice of the company's value depends on a durable, decades-long tail that is inherently harder to be certain about. One item we flag for transparency: Bentley's own cash-flow statement reclassified roughly $70-90 million a year of a balance-sheet item called Cloud Services Subscription deposits (cash customers prepay into their cloud accounts before consuming services) starting with the 2025 annual report. This did not change any of the totals we relied on, only how a couple of underlying lines are labeled and split, and we accounted for it directly rather than let it distort our figures.