Assessing Duolingo’s Valuation After Sharp 2025 Share Price Slide and Growth Reassessment
- If you have been wondering whether Duolingo at around $185 a share is now a bargain or still a pricey growth story, you are not alone.
- The stock has had a rough patch recently, down about 10.6% over the last week and roughly 42.9% year to date, even though it is still up around 158.3% over the past three years.
- That slide comes after a period when investors had priced Duolingo as a high growth, category defining language learning platform and are now reassessing what they are willing to pay for that story. At the same time, the company has continued rolling out new products like music and math courses and expanding its paid subscription base, which keeps the long term growth narrative very much alive.
- On our framework the stock scores a 3/6 valuation check, suggesting it looks undervalued on some metrics but not across the board. Next we will walk through those different valuation lenses and, by the end, explore a more holistic way to judge what Duolingo may really be worth.
Find out why Duolingo's -46.7% return over the last year is lagging behind its peers.
Approach 1: Duolingo Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a company is worth by projecting the cash it can generate in the future and then discounting those cash flows back into today’s dollars. For Duolingo, Simply Wall St uses a 2 stage Free Cash Flow to Equity model based on cash flow projections.
Duolingo generated around $341.6 Million in free cash flow over the last twelve months, and analysts expect this to grow strongly in the coming years. By 2027, forecast free cash flow is about $629.9 Million, and Simply Wall St extrapolates this trend further so that by 2035 projected annual free cash flow is just under $1.2 Billion, all in $.
When these future cash flows are discounted back, the model arrives at an estimated intrinsic value of roughly $477.73 per share. Compared with the recent share price near $185, this DCF output suggests the stock is about 61.1% undervalued on this specific measure.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Duolingo is undervalued by 61.1%. Track this in your watchlist or portfolio, or discover 908 more undervalued stocks based on cash flows.
Approach 2: Duolingo Price vs Earnings
For profitable companies like Duolingo, the Price to Earnings ratio is a useful way to gauge what investors are willing to pay for each dollar of current earnings. It naturally ties valuation to profitability, which typically anchors returns better than revenue or asset based multiples.
What counts as a normal or fair PE depends on how quickly earnings are expected to grow and how risky those earnings are. Higher growth and lower risk can justify a higher multiple, while slower or more volatile earnings usually warrant a discount. Duolingo currently trades on a PE of about 22.3x, which is above the broader Consumer Services industry average of roughly 16.7x, but below the peer group average of around 25.0x.
Simply Wall St also calculates a proprietary Fair Ratio of about 11.3x for Duolingo, which reflects its specific growth outlook, margins, risk profile, industry and market cap. This tends to be more informative than a simple peer or industry comparison because it is tailored to the company, not just its sector. Since Duolingo’s current 22.3x PE is materially above the 11.3x Fair Ratio, this lens points to the shares being overvalued on earnings.
Result: OVERVALUED
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1446 companies where insiders are betting big on explosive growth.
Upgrade Your Decision Making: Choose your Duolingo Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework on Simply Wall St’s Community page where you connect a company’s story to a financial forecast and then to a fair value estimate. A Narrative is your view of Duolingo’s future, written as a short story that explains why you think revenue, earnings and margins will move a certain way, and what price that makes the stock attractive or expensive. Because Narratives turn your assumptions into a clear fair value, you can compare that value with the current share price to decide whether to buy, hold or sell, and they update dynamically as new earnings, news or guidance comes in. For example, one Narrative on Duolingo might focus on rapid international expansion, AI driven monetization and long term margin gains to justify a fair value closer to $600, while another more cautious Narrative might emphasise slower user growth, regulatory risks and competition to arrive at a fair value nearer $239.
Do you think there's more to the story for Duolingo? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com