$0.30
$8.80
bear $0.30
base $0.80
bull $8.80
margin of safety $0.45
market price* $18.75
SailPoint sells identity-security software that controls who inside a large organisation can access which systems, and increasingly runs it as a cloud subscription. Revenue grew from $700M (year to January 2024) to $862M to $1,071M (year to January 2026), and cloud subscription recurring revenue (SaaS ARR) rose from $388M to $746M. Existing customers expand reliably: net retention was 114%, 114% and 113% in the last three year-ends. The company returned to public markets in February 2025, is still controlled by Thoma Bravo, repaid its old debt and had no borrowings under its revolving credit line at the last 10-K; it held about $310M of cash at July 2026. The central issue is stock-based pay. We treat it as a real cost. It was $32M in fiscal 2025, $255M in fiscal 2026 (heavy one-time vesting at the IPO) and is running about $68M a quarter in 2026, roughly 22% of revenue, which is above the second half of last year (about $50M a quarter). Operating cash flow was $70.6M in fiscal 2026 and $83.2M in the first half of fiscal 2027, but after subtracting stock pay, capital spending (about $19M, mostly capitalised software) and the cash timing benefit of annual up-front billing, owner earnings were about -$214M in fiscal 2026 (-$0.39 per share) and are running near -$100M a year now. Earlier years are on a much smaller pre-IPO share count and are not comparable. The earlier estimate for this company was made on a different basis and is not comparable to these figures. Base case: revenue growth from the installed base slows from 10% a year toward 1% over ten years, reaching roughly $2.2B. Cash earnings before stock pay stay at today's roughly 14% of revenue and stock pay stays flat at about $275M. That produces owner earnings of about -$100M now, turning slightly positive (about $30M) by year ten and staying flat thereafter. The business is worth roughly $0.2B, there is no debt, and net cash of about $310M ($0.55 per share) brings the total to about $0.80 per share. Growth beyond the installed-base expansion, further margin gains and lower stock pay were left out because none is yet contracted or proven through a downturn, even though cash margins have improved from about 5% to roughly 16% in three years. Bear case: enterprise software budgets tighten as they did in 2022-2023, growth falls to about 6% fading to zero, cash margin slips to 10%, and stock pay cannot be sustained without costing more than the business earns. Management would have to cut pay or dilute holders heavily; we value the shares at about the cash on hand, $0.30 per share, with no debt owed. Bull case: net retention of about 113% holds, growth starts at 15%, and the margin gains of the last three years continue to 22%. That gives owner earnings of roughly $360M by year ten and about $8.80 per share. What would make this wrong: stock pay shrinking in dollars, which would lift value sharply, or heavier dilution, which would erase it. Controlling-holder share sales are a further overhang. Margin-of-safety price: We have little certainty about the earnings level, because the business currently loses money after paying staff in shares, and the answer depends on a ratio (stock pay to revenue) that has only two public data points. The worst plausible outcome is a software spending downturn while stock pay stays high, which would leave shareholders with roughly the cash and ongoing dilution; the lack of debt means the business would survive it. If wrong about margin or stock pay, the shares are worth about $0.30 to $0.80; if the bull plays out, near $9. The business pays no dividend in the meantime, so any return must come from price alone, and the price assumes a two-to-three-year holding period. The margin-of-safety price is $0.45, roughly the cash backing plus little for the business, because from that level the base case implies the required 20% a year and the bear case implies a loss of about a third.