QUALYS, INC. (QLYS) stock intrinsic value fair value estimate & owner earnings analysis

Qualys sells cloud-based vulnerability management, compliance and IT asset security software to enterprises on a subscription basis. Customers run continuous scans of their servers, cloud workloads and endpoints against Qualys's platform to find security gaps and prove compliance with regulations and internal policy -- a recurring, budget-line expense rather than a discretionary purchase. Revenue has grown every single year for at least the past decade, including through 2020, which is the kind of durable, evidenced demand pattern this valuation leans on for the years furthest into the future. Owner earnings (cash generated by the business after the stock compensation paid to employees and the capital spending needed just to keep running, before any spending aimed at growth) were built from the audited cash flow statements. Two accounting judgments mattered. First, Qualys used to run its own data centers, which required heavy annual equipment spending (roughly 11-16% of revenue in 2016-2017); it has since shifted most of that infrastructure to public cloud hosting, and equipment spending has fallen to under 1% of revenue in the most recent year. That shift is treated as real and structural, not temporary, so the recent low level of required ("maintenance") spending is used going forward rather than the older, higher level. Second, 2021's results included a one-time $28.7 million surge in stock-based compensation tied to the departure of the company's former CEO; that year is set aside as a distortion when picking the anchor level of earnings, though the cost itself is not erased -- it happened and is counted in that year's history. The anchor level of owner earnings is the median of the last four normal years (2022-2025), which works out to just over $4 per share. The most recent year (2025) grew an unusually strong 42% over 2024, but that jump was mostly a one-time function of equipment spending bottoming out and a favorable swing in a tax accounting item -- not a repeatable growth rate -- so the base case assumes a much lower, high-single-digit growth rate in the near term, roughly in line with recent revenue growth. Three cases were built. The base case assumes revenue and earnings keep growing at a rate similar to the 9-10% seen in 2024-2025, moderating gradually, with the recurring-revenue moat persisting at a modest pace beyond the ten-year mark given the unbroken multi-year growth record. The bear case reflects two specific, disclosed pressures: the company's effective tax rate has been rising every year on record (15.1% in 2022 to 19.7% in 2024) as older tax shields wear down, which will increasingly eat into cash earnings even if the business itself keeps growing; and revenue growth has already been decelerating (13% in 2023 to under 10% in 2024 and 2025) against well-funded competitors expanding into the same space. The bear case assumes this deceleration continues toward a low, flat growth rate with a higher tax rate. The bull case assumes the company sustains something closer to its stronger recent growth years and continues the buyback program it has run and repeatedly expanded for years (authorized repurchases now total $1.6 billion), which reduces the share count further. On this basis, shares appear worth roughly $89 in the bear case, $213 in the base case, and $321 in the bull case. Given the meaningful gap between the bear and base cases, a substantial discount to the base-case estimate is used in setting a margin-of-safety price of about $127, to leave room for error if the tax-rate or competitive pressures prove worse than assumed. Qualys carries no debt, which removes one common source of downside in a weak scenario. One item could not be perfectly traced: the exact mix of deferred-tax and other minor adjustments differs slightly between filings in a couple of years, though the differences are small and do not affect the conclusions above.