AGILYSYS, INC. (AGYS): what the price assumes

In the published model solve dated 2026-Q2, anchored at $117.88, AGILYSYS, INC. (AGYS) is priced for today's economics sustained for ~12.2 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/AGYS

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 9: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.4% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: elevated (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.

Per-Model Detail (n=17)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Two thirds of revenue now arrives as subscription and maintenance, the largest of the three revenue lines, and its gross margin improved to 79.4% in fiscal 2026 as "revenue increases outpaced variable costs as a result of cost optimization discipline."
• Operating profitability has roughly doubled in two years, from "6.6 %" of revenue in fiscal 2024 to "13.5 %" in fiscal 2026, on revenue that grew about 16% in each of those years.
• The share count has grown about 2.9% a year over the four years to December 2025 at a company with no funded borrowings and positive cash flow, which makes stock compensation, not financing, the thing diluting owners.

Bull Case

Consider what this software actually does for the person who buys it. It runs the front desk, the point of sale, the reservation book and the loyalty file for hotels, casinos, resorts and stadiums. When it works, nobody notices. When it fails, guests are standing in a lobby at 4pm with nowhere to check in. That asymmetry is the entire reason hospitality operators replace these systems roughly once a decade and grumble about it the whole time, and it is why the interesting number at Agilysys is not revenue growth but revenue composition.

The composition has been changing in the direction that matters. Subscription and maintenance is now the largest of the three lines at about two thirds of revenue, and its economics improved while it grew: gross profit on that line rose 23.3% in fiscal 2026 with gross margin moving from 78.0% to 79.4%, as "revenue increases outpaced variable costs as a result of cost optimization discipline." Meanwhile products revenue, the one-time software licences and third-party hardware, "decreased $0.2 million, or 0.4%". A shrinking product line usually reads as trouble. Here it is the transition working: revenue that used to arrive once is arriving every month instead.

That shows up where operating leverage always shows up first, in the operating margin. The 10-K puts fiscal 2026 operating income at "13.5 %" of revenue against "8.2 %" the year before, which in turn was up from "6.6 %" in fiscal 2024. Profitability roughly doubled in two years while total net revenue rose "$43.7 million, or 15.9%, in fiscal 2026 compared to fiscal 2025" and by a similar 16.1% the year before that. Growing at that pace usually costs margin. Getting both at once means the incremental subscription dollar is landing on a cost base that was already built.

The forward commitment is specific rather than aspirational. Management has guided fiscal 2027 revenue to $365 million to $370 million, up about 15% on the $319.3 million reported for fiscal 2026, with subscription revenue growth expected to hold near 30%. Subscription compounding at that rate against a total growing at 15% means the mix keeps improving whether or not the top line surprises, and mix is what has been driving the margin.

Underneath sits a balance sheet with nothing to argue about. There are no funded borrowings, operating profit covers what little interest there is roughly 39 times over, and the company generates cash rather than consuming it. For a software business in the middle of a model transition, that matters more than it looks: transitions are the period when a company most needs to be able to absorb a soft quarter without asking anyone's permission, and Agilysys can.

Bear Case

Start with who is being paid, because it is not the shareholder. Over the four years to December 2025 the share count grew about 2.9% a year. This is a profitable company with no funded borrowings and positive free cash flow, so nothing forced that dilution. It is compensation. The scale of it is visible in the cash flow, where charging the stock issued to employees against the cash produced takes roughly a quarter off the reported figure. A meaningful slice of what the business generates is being paid out in shares that come from existing holders' ownership, and no buyback offsets it. That is a defensible way to run a growth software company. It is not a free one, and an owner paying a top-of-market multiple is paying it on the pre-dilution number.

Then look at what the multiple asks for. At roughly 71 times company-wide operating income, the price implies growth held at the fastest rate the business can self-fund for about 13 years. The rate is not the problem; Agilysys has recently grown at something like it. Duration is the problem. Only about 15% of comparable fast growers sustained that pace across a decade, and the multiple being paid sits at the very top of its peer distribution, well beyond the upper quartile. This is a demanding bet on uninterrupted execution rather than a bet on whether the company is good.

The most specific threat to that duration is one the company names itself, and it is not a rival hospitality vendor. The 10-K warns that "The rapid adoption of AI technologies may create an 'arms race' dynamic in our industry, in which competitors leverage AI to develop more efficient, automated, or lower-cost alternatives to our offerings or to disrupt traditional subscription-based software models." Read the last clause again. The risk is not only that someone builds a better property management system; it is that the subscription model itself, the thing that has driven the margin expansion, becomes cheaper to replicate. A per-property, per-month price is defensible when building the alternative takes years. It is less defensible when it takes months.

Delivery is the other soft joint, and it is already showing. The 10-K records that on professional services, "gross profit margin decreased from 31.3% to 27.3%", so the implementation arm got less profitable in the same year the subscription arm got more so. That matters because implementations are the gate every subscription dollar passes through, and the filing describes exactly what jams the gate: "customer-specific factors, such as the stability, functionality, interconnection and scalability of the customer's pre-existing information technology infrastructure, as well as financial or other circumstances could destabilize, delay or prevent the completion of the" project. Deferred go-lives do not show up as lost deals. They show up as a quarter that missed.

Even the near-term guidance carries a step down. Management has told investors to expect the adjusted margin measure it reports to fall to a range of 16% to 17% in the first quarter of fiscal 2027, against 25.9% for fiscal 2026, on the timing of customer conference costs. The explanation is plausible and probably correct. The point is what it demonstrates: at this valuation, margin is the variable doing the heavy lifting, and margin at this company can move ten points on the timing of an event.

The concession is real and should be made plainly. Agilysys is growing faster than most of the software companies it sits beside, it is expanding margin rather than buying growth, and it owes nobody money. The bear case is not that the business disappoints. It is that a business can perform well for years and still disappoint an owner who paid for thirteen of them.

Valuation

The bet here is measured in years rather than in percentage points. At $99.01 the market pays about 71 times company-wide operating profit, and what that multiple embeds is not a heroic growth rate but an unusually long one: growth held at the fastest pace the business can fund out of its own earnings for something like 13 years. The company's recent record supports the rate comfortably. The stretch is entirely in the duration, and about one in seven comparable fast growers has managed a run that long.

The methods sort themselves accordingly. Book-value approaches, trailing earnings-power screens and peer earnings multiples all land well below the price, several of them at a small fraction of it. Only the forward cash-flow methods arrive at the price, and one of them gets there while holding today's enterprise multiple flat into the exit year instead of letting it compress. When the static frames are that far under and only the forward ones reach, what is being paid for is durability, not current earnings. The static methods are not wrong; they are structurally unable to price a business whose margin has been moving this fast.

And it has been moving fast, which is the strongest argument for the forward frames. Operating income went from "6.6 %" of revenue in fiscal 2024 to "8.2 %" to "13.5 %" in fiscal 2026, on revenue that rose "$43.7 million, or 15.9%, in fiscal 2026 compared to fiscal 2025." Trailing earnings measure a business that no longer exists at this company; the fiscal 2024 cost base was carrying a much smaller subscription book. Whether that continues is the whole question, and the composition of revenue is where the answer will appear first, because subscription and maintenance is both the largest line and the high-margin one.

Cohort position is where the price looks most exposed. Among the software companies it sits with, Agilysys outpaces the mature end easily, since NetScout grew 4.5% year over year, Pegasystems 3.5% and CSG Systems 3.0%, but it trails Samsara at 29.6% and First Advantage at 53.5%. On profitability it lands in the middle: NetScout turns 12.8 cents of every revenue dollar into operating profit, Waystar 22.9 cents, Pegasystems 10.2 cents, and Samsara slightly less than nothing. Middling growth against the fast names, respectable profitability, and a multiple at the very top of the distribution. That gap is the premium, and it rests on the mix shift rather than on anything visible in a peer screen.

The balance sheet neither helps nor hurts the argument much, which is itself worth saying. There are no funded borrowings, interest is covered roughly 39 times over, and cash is being generated rather than burned, so there is no downside scenario in which financing forces the outcome. The one leak is at the top of the capital structure rather than the bottom: the share count has been climbing about 2.9% a year, so a portion of the growth being paid for at this multiple is being redistributed to employees before it reaches the owner.

Catalysts

The next data point is imminent. Agilysys reports fiscal 2027 first-quarter results after the market closes on Monday, July 27, with a conference call the same afternoon.

Three things in that report carry more weight than the headline. First, subscription growth: management has guided fiscal 2027 revenue to $365 million to $370 million against $319.3 million in fiscal 2026, with subscription revenue expected to keep growing near 30%. That line is the one driving mix, and mix is driving margin. Second, total growth: management has indicated the first quarter should look similar to the roughly 24% growth posted in the fourth quarter of fiscal 2026.

Third, and most likely to be misread, the margin steps down on purpose. The company has guided its adjusted margin measure to 16% to 17% for the first quarter against 25.9% for fiscal 2026, attributing the gap to one-time customer conference costs landing in the period. A guided decline that arrives as guided tells you nothing new. A decline that comes in worse, or that management attributes to something other than the conference, would say the operating leverage of the last two years has a limit that has now been reached.

Peer Cohorts (Per Segment, With Filing Citations)

Hospitality Software (reported)

• NTCT (NETSCOUT SYSTEMS, INC.)
• FY2025 10-K: …meet the increasing demands and an ever-changing technology landscape of IP networks, service, applications, and cybersecurity threats. To further elevate our value proposition and address the near- and long-term needs of customers and prospects, we have delivered major product upgrades across our product lines by…
• FY2025 10-K: …us support a larger, more global and more diverse customer base. We also plan to continue to enhance our technology value, product capabilities and customer relevance through the continued integration of our products into technology partner products. • Pursue Strategic Acquisitions - We have completed many…
• PEGA (PEGASYSTEMS INC.)
• FY2025 10-K: …complexity of enterprise operations in domains like supply chain, order management, quality management, shared services, customer service, and aftermarket services, including warranty management and captive finance, while minimizing the constraints on digital transformation caused by legacy systems. • Consumer…
• FY2025 10-K: …customers, and reducing risk. Along with our partners, we deliver solutions tailored by industry. 7 Our clients represent many industries, including: • Financial services - Pega's software for AI-powered decisioning and workflow automation is used by financial services organizations for Customer Engagement,…
• CSGS (CSG SYSTEMS INTERNATIONAL, INC.)
• FY2025 10-K: …primarily within our geographically dispersed, dedicated account teams, with senior level account managers who are responsible for winning new customers, expanding our business with existing customers, and renewing existing contracts. In addition, we have partnerships and alliances with leading industry participants.…
• FY2025 10-K: …on stand-alone selling prices for software licenses, cost plus applicable margin for third-party licenses and/or services, and established pricing for maintenance. The initial sale of our software products generally requires significant production, modification, or customization, such that the delivery of the…
• WAY (Waystar Holding Corp.)
• FY2025 10-K: …clients to increase the share of revenue they collect. • Quicker payments. Our software helps expedite payments by streamlining and automating cumbersome workflows that create excessive delays. • Greater productivity. Our ability to automate portions of the payment cycle allows our clients to reduce operating costs…
• FY2025 10-K: $25 billion by 2030, driven by growth within healthcare payments (notably, in prior authorizations, patient payments, and revenue cycle management analytics), increased outsourcing in revenue cycle management, as well as secular technology tailwinds such as greater utilization of AI. We expect to expand our TAM…
• FA (First Advantage Corporation)
• FY2025 10-K: …customers and build local expertise in compliance and screening standards. They maintain ongoing interactions with key customer users and program owners, conducting regular formal account reviews to help ensure high performance, satisfaction, and retention. Additionally, they organize customer advisory boards and…
• FY2025 10-K: …include: • Criminal Records Monitoring: Provides background screening reports on an ongoing basis post-onboarding of any reportable criminal records of their employees, contractors, contingent workers, and drivers. 9 • Motor Vehicle Records : Provides customers with a streamlined process to establish an initial…
• IOT (SAMSARA INC.)
• FY2025 10-K: …We rely on third-party software to provide many essential financial and operational services to support our business, including enterprise resource planning, customer relationship management, and human capital management. Many of these vendors are less established and have shorter operating histories than traditional…
• FY2025 10-K: …represents the manner in which the expected benefit will be derived. The amortization of costs related to the software is primarily included in cost of revenue on the consolidated statements of operations and comprehensive loss. The Company also enters into certain cloud-based software hosting arrangements that are…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.