Evaluating GitLab Stock After a 12% Rally and Mixed 2025 Growth Signals

Thinking about what to do with GitLab stock right now? You are definitely not alone. Whether you are a long-term believer in the DevOps giant or just curious about the recent action in software stocks, GitLab's share price has given investors plenty to discuss. Over the last week, shares have posted a strong bounce, rising more than 12%, while the past month has been a bit rockier, with the price edging down about 2%. Year to date, the stock is still down over 21%, which reflects the volatility seen across tech this year.

Some of this movement can be attributed to changing risk appetites in the market and major themes affecting cloud software. It is important to note that analysts’ average price target remains significantly above current levels, which suggests there could be potential upside. Revenue has increased by a healthy 17% compared to last year, indicating that the business is still growing. However, challenges remain, as net income growth is still negative, and the company is considered undervalued in only 2 out of 6 major valuation checks, resulting in a current value score of 2.

So, is GitLab a bargain or a value trap? Let’s break down what the numbers reveal across the key valuation methods. There is also an even smarter way to understand value that will be discussed at the end of this article.

GitLab delivered -4.8% returns over the last year. See how this stacks up to the rest of the Software industry.

Approach 1: GitLab Cash Flows

The Discounted Cash Flow (DCF) model is a popular valuation tool because it projects a company’s expected future cash flows and discounts them back to today’s value. This process estimates what a business is worth right now based on its future cash-generating ability.

For GitLab, the most recent Free Cash Flow (FCF) stands at negative $3.5 million. This reflects investment and growth-mode spending often seen with software companies. However, projections highlight substantial growth ahead, with analysts expecting FCF to rise to $446.5 million by 2030 and further increases in the years beyond.

Using a two-stage Free Cash Flow to Equity model, the estimated intrinsic value per share is $51.99. Compared to current market pricing, this signals that GitLab is trading at a 14.9% discount to its intrinsic value. This indicates the stock may be 14.9% undervalued.

This notable gap suggests investors are undervaluing the company’s future earnings potential based on these forecasts, especially as expected cash flows accelerate.

Result: UNDERVALUED

Our DCF analysis suggests GitLab is undervalued by 14.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: GitLab Price vs Sales

For companies like GitLab that are still scaling up to sustained profitability, the Price-to-Sales (PS) multiple is often a practical valuation tool. Because consistent earnings are still a ways off, looking at sales provides a useful benchmark for how the market is valuing GitLab’s current business activity and its potential to convert revenue into future profits.

A higher PS ratio can be justified for growth companies with strong revenue trajectories, industry leadership, or a clear path to improved margins. However, increased perceived risk or lagging sales growth should put downward pressure on the multiple. Investors need to weigh both the company’s future growth prospects and any volatility in the tech sector when considering what might be considered a typical or fair PS ratio for GitLab.

Currently, GitLab trades at 9.09x sales. This is above the software industry average of 4.91x and is slightly above the peer average of 8.30x. Simply Wall St’s Fair Ratio methodology, which weighs factors such as earnings growth, industry conditions, profit margins, and risk, estimates GitLab’s fair multiple at 10.55x. Because the Fair Ratio is closely aligned with the present valuation, the data suggests GitLab’s stock is priced about right based on current and expected sales performance.

Result: ABOUT RIGHT

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 GitLab Narrative

A Narrative is simply the story that connects your perspective on a company with the numbers behind your investment decisions, outlining what you believe about its potential and how those beliefs shape your financial expectations and fair value estimate.

Unlike static models, Narratives bridge the gap between a company's unique story, its projected financials, and what you see as a reasonable price. This approach turns complex analysis into an approachable tool anyone can use on Simply Wall St alongside millions of other investors.

By crafting your own Narrative, you can easily compare what you think GitLab is worth to its current market price, helping you decide whether it is time to buy, hold, or sell, all while adapting to new news or earnings as they happen.

For example, some GitLab Narratives project a fair value as high as $85.00 if AI-led platform expansion pays off. More cautious narratives price it as low as $45.00 if competition or delayed revenues limit growth. Your story directly drives your numbers and your decisions.

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