Is DoorDash Still Attractive at $225 After a 307% Three Year Surge?

• Wondering if DoorDash at $225 is still a smart buy after its big run, or if the easy money has already been made? Let us unpack what the current price really implies about its future.
• The stock has climbed 13.4% over the last week, 10.1% over the past month, and is up 31.8% year to date, adding to a 26.1% gain over the last year and an eye catching 307.1% over three years.
• These moves have come as DoorDash doubles down on expanding beyond restaurant delivery, from groceries and convenience to nationwide retail partnerships. Investors see this as a way to stretch its logistics network further. At the same time, ongoing debates around gig worker regulations and competition in last mile delivery keep risk perceptions shifting and help explain some of the volatility in the share price.
• On our framework, DoorDash currently scores a 3 out of 6 valuation checks, suggesting the market may be paying up for growth but not wildly overshooting reality, at least on traditional metrics. Next we will walk through what different valuation approaches say about that score, and then close with a more powerful way to understand what this price really bakes in.

DoorDash delivered 26.1% returns over the last year. See how this stacks up to the rest of the Hospitality industry.

Approach 1: DoorDash 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 discounting those cash flows back to today in $ terms.

For DoorDash, the model starts with last twelve months free cash flow of about $2.0 billion and then layers on analyst forecasts and longer term extrapolations from Simply Wall St. Analyst estimates take free cash flow to roughly $6.2 billion by 2029, with further growth projected into the next decade as the platform scales beyond restaurants.

Adding up these discounted cash flows using a 2 Stage Free Cash Flow to Equity framework gives an intrinsic value of about $307 per share. Compared to the current price around $225, the DCF suggests the stock trades at roughly a 26.8% discount. This indicates that the market may not be fully pricing in the projected cash generation.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests DoorDash is undervalued by 26.8%. Track this in your watchlist or portfolio, or discover 907 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for DoorDash.

Approach 2: DoorDash Price vs Earnings

For a profitable business like DoorDash, the price to earnings (PE) ratio is a useful way to judge value because it ties the share price directly to the profits the company is generating today. In general, faster expected earnings growth and lower perceived risk justify a higher PE, while slower growth or higher risk should pull that multiple down.

DoorDash currently trades on a hefty 112.37x PE, well above the broader Hospitality industry average of about 21.20x and also ahead of its peer group average of roughly 33.78x. On the surface, that makes the stock look expensive. However, Simply Wall St uses a proprietary Fair Ratio, which estimates what PE you would expect for DoorDash given its own mix of earnings growth, profit margins, industry, market cap and risk profile.

The Fair Ratio for DoorDash is 50.14x. This means the stock trades at more than double the PE that would normally be justified by those fundamentals. Because this approach adjusts for growth and risk and is tailored to the company rather than generic peers, it offers a more nuanced yardstick. On that basis, the current valuation looks stretched.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1451 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your DoorDash Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework that lets you attach a clear story about a company to the numbers you think are realistic, from future revenue and earnings to profit margins and fair value.

A Narrative links three pieces together: the business story you believe, the financial forecast that flows from that story, and the fair value those assumptions imply, so you can see how your view of DoorDash actually translates into a price.

On Simply Wall St, Narratives are an easy to use tool available on the Community page, used by millions of investors, that help you compare your fair value view to the current market price and then update those outputs dynamically as new news, earnings or regulatory developments come in.

For example, one DoorDash Narrative on the platform might assume rapid expansion into new verticals and rising margins to around the mid teens, and justify a fair value above $300 per share. A more cautious Narrative could focus on regulatory risk, competitive pressure and slower profitability, resulting in a fair value closer to $205 and a very different conclusion about whether the current price looks attractive.

Do you think there's more to the story for DoorDash? 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