JKHY Jack Henry & Associates
Wide-moat community-bank toll booth, fairly steady, but still priced modestly above intrinsic value.
The story
Jack Henry is the core-processing, digital banking and payments toll booth for about 7,500 US community banks and credit unions. Its moat comes from very high switching costs, multi-year contracts and a service reputation that consistently wins share from Fiserv and FIS. It is a mature compounder: growth is steady and GDP-plus, driven by cloud migration, digital and payments cross-sell, and slow operating leverage rather than new markets.
No facts changed materially, so all drivers stay as they were. TTM margin rose to 25.9%, which supports the 28% target as the cloud-hosting mix matures. Revenue growth of about 7% matches the 5-year CAGR, and sales-to-capital of 1.22 validates the 1.25 assumption. A 10-year horizon fits a sticky franchise in a consolidating, slow-growth customer base; the low beta reflects recurring, contracted revenue.
Value drivers
| Revenue growth (Y1) | 7.0% |
| Terminal growth | 4.0% |
| Forecast horizon | 10y |
| Target operating margin | 28.0% |
| Years to target margin | 5 |
| Sales-to-capital | 1.25 |
| Beta | 0.85 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 9.0% |
| Terminal WACC | 9.7% |
Valuation bridge
| PV of explicit FCFF | 3.72B |
| PV of terminal value | 5.41B |
| Equity value | 9.01B |
| ÷ shares → per share | $128.57 |
News
bullish +0.30 · 8 articles
- What’s Going On With Jack Henry & Associates (JKHY)?
- Is Jack Henry & Associates Stock Underperforming the Dow?
- 3 of Wall Street’s Favorite Stocks with Competitive Advantages
- Jack Henry & Associates (JKHY): Why Disruption Risks Appear Overstated
- Why Is Jack Henry (JKHY) Down 2.5% Since Last Earnings Report?
- Jack Henry (JKHY) Stock Trades Up, Here Is Why
- Why Jack Henry (JKHY) Stock Is Up Today
- Jack Henry's 2026 Outlook: Cloud-Native Platform Drives Record Core Banking Wins
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 2.72B | 7.0% | 26.3% | 551.35M | 142.48M | 408.87M | 375.13M |
| 2 | 2.90B | 6.7% | 26.7% | 597.64M | 145.20M | 452.45M | 380.85M |
| 3 | 3.09B | 6.3% | 27.1% | 645.63M | 147.13M | 498.50M | 384.99M |
| 4 | 3.27B | 6.0% | 27.6% | 695.12M | 148.22M | 546.90M | 387.52M |
| 5 | 3.46B | 5.7% | 28.0% | 745.86M | 148.38M | 597.48M | 388.43M |
| 6 | 3.64B | 5.3% | 28.0% | 785.64M | 147.57M | 638.08M | 380.59M |
| 7 | 3.83B | 5.0% | 28.0% | 824.93M | 145.72M | 679.20M | 371.69M |
| 8 | 4.00B | 4.7% | 28.0% | 863.42M | 142.81M | 720.61M | 361.81M |
| 9 | 4.18B | 4.3% | 28.0% | 900.84M | 138.80M | 762.04M | 351.03M |
| 10 | 4.34B | 4.0% | 28.0% | 936.87M | 133.67M | 803.20M | 339.46M |
Key risks
- Bank and credit union consolidation shrinks the client base and shifts pricing power to acquirers
- Fintech and cloud-native core entrants (e.g., Temenos, Thought Machine) erode new-logo wins
- Margin expansion stalls as cloud migration and R&D costs absorb operating leverage
Catalysts
- Accelerating conversions to Jack Henry's public-cloud-native core and platform components
- Payments and faster-payments (FedNow, RTP) volume growth driving higher-margin processing revenue