Evaluating Duolingo (DUOL) After Strong Growth, Record Conversions and Improving Free Cash Flow

Recent commentary around Duolingo (DUOL) has focused on its rapid revenue growth, improving user conversion, and steady free cash flow, giving investors fresh reasons to revisit the stock after a choppy year.

See our latest analysis for Duolingo.

Those fundamentals are starting to show up in the tape, with the latest share price of $185.96 coming after a 7.63% one month share price return but a steep 39.88% three month share price decline, leaving the three year total shareholder return still a strong 163.03% even as short term momentum cools.

If Duolingo's swingy ride has you thinking about what else might be setting up for the next leg higher, now is a good time to explore fast growing stocks with high insider ownership

With revenue still climbing, analysts pitching price targets far above today’s level, and cash generation improving, is Duolingo quietly trading at a discount, or has the market already priced in every bit of its future growth?

Most Popular Narrative: 31.3% Undervalued

With Duolingo last closing at $185.96 versus a narrative fair value around $270.74, the most followed view sees substantial upside still on the table.

Strategic investments in AI driven personalized learning and model optimization are yielding reduced unit costs, improved gross margins, and enhanced scalability. As compute costs decline further, expanded access to higher tier Max features in international markets is expected to support margin expansion.

Read the complete narrative.

Curious how this story turns strong engagement, rising margins, and ambitious growth forecasts into that higher fair value? Unpack the full playbook behind those projections.

Result: Fair Value of $270.74 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, slowing growth in mature markets and rising AI driven competition could challenge Duolingo's pricing power and constrain the upside implied by this narrative.

Find out about the key risks to this Duolingo narrative.

Build Your Own Duolingo Narrative

If you see Duolingo differently, or want to dig into the numbers yourself, you can craft a personalized narrative in just minutes: Do it your way

A great starting point for your Duolingo research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

Do not stop at one opportunity. Use the Simply Wall Street Screener to hunt for fresh setups before the crowd catches on and the upside shrinks.

• Capture high potential mispricings by targeting companies that look inexpensive on cash flows, starting with these 914 undervalued stocks based on cash flows before the market corrects the gap.
• Ride transformational innovation by zeroing in on these 24 AI penny stocks that are reshaping industries with real products, revenue traction, and scalable technology.
• Lock in reliable income streams by focusing on these 12 dividend stocks with yields > 3% that can support compounding returns through market cycles.

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