What Does Coursera’s 47% Rally Mean After New Google Partnership Announcement?

Thinking about what to do with Coursera stock? You are not alone. With its recent highs and lows, Coursera has definitely caught the attention of both new and seasoned investors. Over the past year, the stock is up a remarkable 47.1%, with a 32.2% gain year to date. These numbers are definitely exciting, but short-term shifts can tell a slightly different story. The last week saw the stock slip by 3.5%, while the past month had a gentle increase of just 1.4%. Overall, the rollercoaster pattern has many folks asking: is Coursera actually undervalued, or are investors simply chasing momentum?

A big part of that answer depends on how you look at the numbers. Based on a blended valuation score that tallies up six major checks for undervaluation, Coursera currently scores a 1 out of 6. That means only one key metric suggests the stock might be undervalued, so caution is warranted. Still, with Coursera’s expanding role in online education and ongoing market interest in tech-forward learning companies, there are arguments on both sides of the fence.

So, how should you approach Coursera’s value at its current price? Next, we will walk through the main valuation techniques investors use and see how Coursera stacks up. After looking at the traditional approaches, a more insightful way to think about what this company is really worth will be shared.

Coursera scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Coursera Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today's value. This approach helps investors determine what a stock is truly worth, based on its ability to generate cash in the years ahead.

For Coursera, the model uses a 2 Stage Free Cash Flow to Equity approach. Currently, Coursera's Free Cash Flow (FCF) stands at $87.1 million. While analysts provide cash flow estimates for the next five years, further annual projections such as reaching $114.8 million in 2035 are extrapolated using credible assumptions. Over the next decade, growth in FCF is expected to continue, albeit at a modest pace.

According to these projections, the estimated intrinsic fair value per share is $13.54. This valuation is 17.2% above Coursera’s current share price, suggesting the stock is undervalued when judged by DCF criteria.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Coursera is undervalued by 17.2%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Coursera Price vs Sales (P/S)

The Price-to-Sales (P/S) ratio is a popular valuation measure, especially for companies like Coursera that are still building profitability but have meaningful revenue growth. Unlike some metrics that require consistent earnings, the P/S ratio remains relevant by focusing on the company’s top line. This makes it particularly useful for evaluating fast-growing firms in the tech and education sectors.

Coursera currently trades at a P/S ratio of 2.54x. To put this in context, the Consumer Services industry average P/S is 1.64x, while the average for Coursera's peers stands at 1.71x. On a surface-level comparison, Coursera appears more expensive than both its direct competitors and the broader industry. Companies with stronger growth prospects or unique market positions often command higher P/S multiples, as investors may be willing to pay a premium for future revenue streams.

To provide a clearer benchmark, Simply Wall St’s proprietary “Fair Ratio” incorporates not just peer and industry comparisons, but also factors like Coursera’s growth outlook, margins, risks, and market cap. For Coursera, the Fair Ratio is estimated at 1.32x. Because this model considers a fuller picture, it often gives a more accurate sense of reasonable valuation than straightforward averages alone.

Comparing the Fair Ratio of 1.32x to Coursera’s actual P/S of 2.54x, the current stock price appears stretched relative to the company’s fundamentals. This suggests Coursera shares may be trading well above what is justified by its financial position and outlook.

Result: OVERVALUED

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

Upgrade Your Decision Making: Choose your Coursera Narrative

Earlier we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is essentially your personal investment story or perspective. It’s how you connect what Coursera does, the trends shaping its industry, and your forecasts for future revenue, margins, and fair value. Narratives allow you to ground your view in both numbers and business realities, linking the company's evolution to a financial forecast and, ultimately, a fair value estimate.

On Simply Wall St's Community page, Narratives are easy and accessible to use, enabling millions of investors to share, compare, and refine their thinking. Narratives help you clarify your stance by comparing your calculated Fair Value to the current share price. As new events or earnings releases come out, Narratives are dynamically updated so your analysis can adjust in real time without having to start over.

For example, some investors see Coursera thriving as technology-driven upskilling surges worldwide, giving them a bullish fair value close to $15.00 per share. Others are more cautious, focusing on risks like fierce competition and projecting as low as $9.00. This shows how Narratives help capture different investment outlooks in one place.

Do you think there's more to the story for Coursera? Create your own Narrative to let the Community know!

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.

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