JACK HENRY & ASSOCIATES, INC. (JKHY): what the price requires
At today's price, JACK HENRY & ASSOCIATES, INC. (JKHY) is priced for +7.0% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/JKHY
Headline
| Field | Value |
|---|---|
| Ticker | JKHY |
| Company | JACK HENRY & ASSOCIATES, INC. |
| Current price | $151.00/sh |
| Composition | Private and Public Cloud 32% / Product Delivery and Services 11% / On-Premise Support 15% / Processing 43% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 10.3% |
| Operating margin today | 25.6% |
| Margin compression implied | -15.3pp |
| Implied growth | 7.0% |
| Multiple paid | 17x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 8.6% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.6pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.29σ |
| cohort percentile (of 177 peers) | 25 |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based land below the price.
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.94x | 5 | expensive |
| Earnings | 1.46x | 5 | expensive |
| Relative | 0.64x | 5 | justifies |
| Growth | 0.84x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Asset
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=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $227.51 | 0.66x | yes | FCF base $0.8B, growth 8% (input: historical growth), terminal g 4.0%, WACC 9.2%, 6yr projection |
| DCF Exit Multiple | Growth | $179.82 | 0.84x | yes | Exit EV/EBITDA: 14.5x / 16.5x / 18.5x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $251.43 | 0.60x | yes | P/E 35x (static sector reference · 2026-04), scenarios: 29.1x / 35.0x / 40.9x (bear / base = reference held flat / bull), EV/EBITDA 25x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $77.97 | 1.94x | yes | BV/sh $29.66, ROE (TTM) 24.3%, ke 9.3% |
| Two-Stage Excess Return | Asset | $126.74 | 1.19x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $126.23 | 1.20x | yes | Rev $2.5B, growth 8% (input: historical growth; tapered), Terminal P/S: 3.6x / 4.3x / 5.1x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $156.61 | 0.96x | yes | EPS $7.15, growth 22% (input: historical EPS growth), PEG=0.96 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $58.97 | 2.56x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.52B × (1−22%) / WACC 9.2% → EPV (no growth) |
| Residual Income | Asset | $114.64 | 1.32x | yes | BV $29.66 + 5yr PV of (ROE (TTM) 24.3% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $69.08 | 2.19x | yes | √(22.5 × EPS $7.15 × BVPS $29.66) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $229.15 | 0.66x | yes | EBITDA $0.66B × sector EV/EBITDA 25.0x |
| FCF Yield | Earnings | $107.67 | 1.40x | yes | FCF $727.6M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $103.33 | 1.46x | yes | SBC-adj FCF $0.70B (FCF $0.73B − SBC $0.03B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $230.71 | 0.65x | yes | EPS $7.15 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $17.25 | 8.75x | yes | BV $29.66 × (ROIC 5.3% / WACC 9.2%) |
| P/Sales Sector | Relative | $279.61 | 0.54x | yes | Revenue $2.52B × sector P/S 8.0x |
| PEG Fair Value | Relative | $234.92 | 0.64x | yes | EPS $7.15 × (PEG 1.5 × growth 21.9% (input: historical EPS growth)) → PE 32.9x |
| Earnings Yield | Earnings | $77.30 | 1.95x | yes | EPS $7.15 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $69.4m |
| Net debt / NOPAT (after-tax) | 0.14x |
| Net debt / operating income (pre-tax) | 0.11x |
| Share count CAGR (buyback) | -0.4% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Jack Henry sells the core processing systems that run roughly 7,500 community and regional banks and credit unions, a business where the contract is the moat: clients sign multi-year outsourced data-processing deals and the cost of ripping out the system that runs every account and transaction is high enough that they rarely leave.
- The clearest risk is concentration in one vertical, since the company states it derives most of its revenue from the financial services industry, so a wave of bank consolidation or a worsening credit cycle removes clients directly rather than gradually.
- Watch the fourth fiscal quarter, where management has flagged slower non-GAAP revenue growth and margin contraction from a digital-revenue slowdown and card-revenue pressure, the first soft print after a record run of competitive core wins.
Bull Case
Start with what management does with the cash, because for a business this steady that decision is the whole story. Jack Henry throws off more free cash flow than it needs to run itself, generating $727.6M against a business that requires little capital to grow, and it returns that cash on two channels: a dividend yielding near 2% and a share count that has been shrinking, down about 0.4% a year. There is no debt problem to solve first, net debt sits at roughly $69M against trailing operating income of $654M, so essentially every dollar of cash is discretionary. Management spends it the way a business with a durable franchise should: reinvesting in cloud migration and buying back stock rather than chasing acquisitions to paper over weak organic growth.
The franchise that generates that cash is one of the stickier ones in software. Jack Henry runs the core systems for community and regional financial institutions, and the revenue is overwhelmingly recurring. The company describes generating revenue from "data processing, transaction processing, software licensing" under multi-year outsourced contracts, the kind of arrangement where the client has wired its entire deposit, lending, and card operation into the vendor's plumbing. Switching cores is one of the highest-risk projects a bank can undertake, which is why retention runs high and why the company can grow Core cloud revenue organically: the FY2025 10-K attributes a Core segment cost-of-revenue increase to "increased direct costs associated with the organic growth in cloud revenue", the signature of clients migrating to higher-value hosted delivery rather than churning out.
The momentum behind that base is real and recent. The company secured 17 competitive core wins in its fiscal third quarter, including five institutions over $1B in assets, which it called its best Q3 for new core wins in seven years. Each core win is a multi-year annuity that compounds: the bank that signs for processing then buys digital banking, payments, and fraud tools on top. GAAP revenue grew 8.7% to $636.2M in that quarter and GAAP EPS rose 12.2% to $1.71, with management raising full-year GAAP EPS guidance to a $6.78 to $6.87 range. A business growing high-single-digit revenue, expanding earnings faster than revenue, and converting nearly all of it to cash is doing the unglamorous things that compound.
Bear Case
The advantage that makes Jack Henry safe is also the advantage most exposed to slow erosion. Its moat is the cost and risk of switching a bank's core system, but that moat protects a shrinking field of customers. The company states plainly that it derives "most of our revenue from products and services we provide to the financial services industry", and the number of US community banks and credit unions, its addressable client base, has been consolidating for years. Every merger that combines two of Jack Henry's clients onto one core, or moves one onto a larger acquirer's competing system, removes a recurring-revenue annuity. The switching-cost moat keeps existing clients in place; it does nothing to replace clients that disappear into mergers.
The second pressure is on price, not retention. Jack Henry's contracts come up for renewal, and the company concedes that to win or keep business it "may need to lower prices or offer other terms that negatively impact our results of operations in order to successfully compete", and that failure to achieve favorable renewals could negatively affect the business. That is the quiet way a sticky franchise degrades: not a mass exodus, but each renewal cycle conceding a little more on price to fend off larger competitors and newer fintech-native platforms targeting the same institutions. The near-term confirmation is in management's own guidance, which flags fourth-quarter margin contraction from a digital-revenue slowdown and card-revenue pressure, the first visible crack in an otherwise clean growth record.
Then there is what the price asks. At roughly 14 times company-wide operating income, the market is paying for the business to keep compounding operating profit, and while that near-term pace sits within what the company has recently delivered, the durability is the bet, not the rate. The valuation methods that lean on earnings power and peer multiples support the price, but the asset-based lens, book value plus the returns earned above the cost of capital, lands well below it, with the most conservative book-anchored reads near $69 to $78 against a $126 price (June 27, 2026). That gap is the warning: pay this multiple and a buyer is underwriting that the consolidation drag never overwhelms the cross-sell engine, in a customer base that structurally gets smaller every year.
Valuation
What the price assumes here is modest, which is itself the point. At about 14 times company-wide operating income, the market is asking for roughly 2.3% annual operating growth sustained over five years, a pace the company has comfortably exceeded recently. The bet is not on the rate; it is on how long the steady compounding lasts. Against the sector, that puts Jack Henry in the lower half of the peer-multiple range, so this is not priced as a growth story.
The methods split along a clean line. Earnings-power, peer-multiple, and cash-flow-growth models land at or above today's price, while the asset-value lens, which anchors on book value and the excess returns earned over the cost of capital, reads the price as expensive. That pattern describes a value-and-earnings supported name rather than a growth bet: the price is defensible on what the business earns and on what comparable software-and-services firms fetch, and it looks rich only when measured against accounting book value, a weak yardstick for an asset-light franchise whose value lives in client relationships rather than on the balance sheet. The DCF methods reach the price by holding today's cash-flow trajectory; the relative-valuation method anchors to a sector P/E near 35x against Jack Henry's lower earnings multiple, which is why peer comparison reads it as inexpensive.
The balance sheet carries none of the downside risk. Net debt of roughly $69M against $654M of trailing operating income is trivial leverage, the share count is slowly shrinking, and free cash flow of $727.6M covers the dividend several times over. The reported operating margin sits near 26%. The vulnerability in this name is not solvency or valuation arithmetic; it is the slow demographics of its customer base, which the price does not obviously discount.
Catalysts
The most recent print set the tone. Jack Henry reported fiscal third-quarter GAAP revenue of $636.2M, up 8.7%, and GAAP EPS of $1.71, up 12.2%, with net income up 10.6% to $122.9M. Alongside it the company raised full-year GAAP EPS guidance to $6.78 to $6.87 and set GAAP revenue guidance of $2,521M to $2,533M. The operational headline was the sales engine: 17 competitive core wins in the quarter, five of them institutions above $1B in assets, described as the best fiscal third quarter for new core wins in seven years.
The near-term watch item is the fourth fiscal quarter, where management guided to slower non-GAAP revenue growth and margin contraction, citing a digital-revenue slowdown, card-revenue pressure, and higher expenses. That makes the next print the test of whether the soft quarter is a one-time timing effect or the start of a slower growth phase. The longer-running theme is the cloud migration of the existing client base and the company's deployment of internal AI tooling, with nearly 100 AI tools approved for internal use across more than 500 use cases, an efficiency lever that bears on the margin question the fourth quarter raises.
Peer Cohorts (Per Segment, With Filing Citations)
Core (reported)
- FIS (Fidelity National Information Services, Inc.)
- (no filing in the citation store)
- FISV (FISERV INC)
- (no filing in the citation store)
- ACIW (ACI WORLDWIDE, INC.)
- (no filing in the citation store)
- NCNO (nCino, Inc.)
- (no filing in the citation store)
- QTWO (Q2 Holdings, Inc.)
- (no filing in the citation store)
Payments (reported)
- FISV (FISERV INC)
- (no filing in the citation store)
- FIS (Fidelity National Information Services, Inc.)
- (no filing in the citation store)
- GPN (GLOBAL PAYMENTS INC.)
- (no filing in the citation store)
- FOUR (SHIFT4 PAYMENTS, INC.)
- (no filing in the citation store)
- ACIW (ACI WORLDWIDE, INC.)
- (no filing in the citation store)
- EVTC (EVERTEC, Inc.)
- (no filing in the citation store)
- PAY (Paymentus Holdings, Inc.)
- (no filing in the citation store)
Complementary (reported)
- NCNO (nCino, Inc.)
- (no filing in the citation store)
- QTWO (Q2 Holdings, Inc.)
- (no filing in the citation store)
- ALKT (ALKAMI TECHNOLOGY, INC.)
- (no filing in the citation store)
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.
- 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.
Sources
Q3 FY2026 earnings release · company FY2026 guidance, May 2026