Donnelley Financial Solutions, Inc. (DFIN): A Bear Case Theory 

We came across a bearish thesis on Donnelley Financial Solutions, Inc. on Valueinvestorsclub.com by GoBills42. In this article, we will summarize the bulls’ thesis on DFIN. Donnelley Financial Solutions, Inc.’s share was trading at $47.98 as of December 1st. DFIN’s trailing P/E was 43.80 according to Yahoo Finance.

Donnelley Financial (DFIN) had been a successful long for several years as improving ROIC, margin expansion, and buybacks supported earnings, but the core software-led leg of the thesis has weakened materially. After repeatedly pushing out long-term software targets—from 2026 to 2028—DFIN now faces deteriorating gross and net retention, making its projected revenue mix shift to 60% software increasingly unrealistic.

Management faces an uncomfortable trade-off: preserve margins by limiting R&D and allowing the tech stack to lag further behind, or accelerate investment and accept margin pressure. Recent margin gains have been driven mainly by price hikes, a lever that is now nearly exhausted. ActiveDisclosure, the company’s key asset, has posted slowing ARR growth and is poised for LSD–MSD growth as tougher comps approach, far too low to bridge the widening gap toward management’s original $500 million software revenue goal.

Underlying data shows structurally worsening churn: DFIN dominates IPO filings yet increasingly loses recurring 10-K clients to Workiva, which retains customers at far higher rates and now commands the most durable, high-quality cohort of filers. DFIN’s customer base skews toward sub-$100 million market-cap companies, elevating bankruptcy-driven attrition, while price hikes, inferior technology, and customer feedback reinforce the shift toward Workiva.

Despite claims that churn was tied to product transitions, gross retention has continued to fall, widening the gap to net retention and signaling competitive losses. With regulatory tailwinds fading, retention deteriorating, R&D structurally outmatched, and pricing power eroding, software growth is likely to decelerate sharply. As expectations re-base and targets slip further, DFIN’s multiple is poised to compress, creating meaningful downside unless the company is sold—a scenario limited by already extracted cost synergies.

Previously we covered a bullish thesis on Donnelley Financial Solutions, Inc. (DFIN) by Dominick D’Angelo in January 2025, which highlighted its recurring software transition, margin expansion, and strong SEC compliance positioning. The company’s stock price has depreciated approximately by 19.27% since our coverage. This is because software targets have fallen short. GoBills42 shares a contrarian view but emphasizes deteriorating retention and competitive pressures.

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Disclosure: None.