Is It Time To Reassess GitLab (GTLB) After A 52% One-Year Share Price Slide

• If you are wondering whether GitLab's current share price reflects its true worth, this article will walk through the numbers in a clear and practical way.
• GitLab's share price closed at US$34.98, with a 3.8% decline over 7 days, a 3.3% decline over 30 days, a 3.3% decline year to date, and a 51.9% decline over the past year. These figures may change how you think about its risk and potential.
• Recent coverage has focused on GitLab as a standalone DevOps platform and its role in helping software teams manage the full development lifecycle. This context helps frame why the market might be reassessing how much it is prepared to pay for the stock.
• Simply Wall St currently assigns GitLab a valuation score of 4 out of 6. Next we will look at how different valuation approaches arrive at that view, before finishing with a way to think about value that goes beyond the usual ratios.

Find out why GitLab's -51.9% return over the last year is lagging behind its peers.

Approach 1: GitLab Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model projects a company’s future cash flows and then discounts them back to today’s dollars, aiming to estimate what the business might be worth right now based on those projected cash streams.

For GitLab, the model used is a 2 Stage Free Cash Flow to Equity approach. The last twelve months Free Cash Flow is reported at about $241.5 million. Analysts provide Free Cash Flow estimates out to 2031, with Simply Wall St extrapolating some of the later years. For example, projected Free Cash Flow for 2031 is $637.5 million, with intermediate years between 2026 and 2035 ranging from around $207.2 million to $906.9 million before discounting.

After discounting these future cash flows back to today, the DCF model produces an estimated intrinsic value of $68.52 per share. Compared with the recent share price of $34.98, this implies the stock is trading at about a 49.0% discount to the model’s estimate of fair value. On this cash flow view, GitLab appears significantly undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests GitLab is undervalued by 49.0%. Track this in your watchlist or portfolio, or discover 875 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 GitLab.

Approach 2: GitLab Price vs Sales

For a company like GitLab that is focused on growing its top line, the Price to Sales, or P/S, ratio is a practical way to compare what investors are paying for each dollar of revenue. It is especially useful when earnings are not yet the main driver of the story.

In general, the P/S multiple the market is willing to pay reflects a blend of growth expectations and perceived risk. Higher expected growth or lower perceived risk tends to support a higher “normal” P/S, while slower expected growth or higher risk usually points to a lower one.

GitLab’s current P/S ratio is 6.50x. That sits above the broader Software industry average of 4.24x, yet below the peer group average of 7.70x. Simply Wall St’s proprietary “Fair Ratio” for GitLab is 7.26x, which is the P/S multiple it suggests based on factors such as the company’s earnings growth profile, profit margins, market cap, risk characteristics and its industry. This Fair Ratio can be more informative than a simple peer or industry comparison because it adjusts for these company specific drivers rather than assuming one size fits all. With the current P/S at 6.50x compared with a Fair Ratio of 7.26x, GitLab screens as undervalued on this measure.

Result: UNDERVALUED

P/S ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1426 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your GitLab Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about a company linked directly to the numbers you think are reasonable for its future revenue, earnings and margins.

On Simply Wall St, within the Community page used by millions of investors, a Narrative connects three parts in one place: the business story, the financial forecast that flows from that story, and the fair value that drops out of those forecasts.

You can then compare that Fair Value with today’s share price to consider whether GitLab is closer to something you might buy, hold, or sell, and your view will automatically update as new information such as news or earnings is fed into the model.

For GitLab, one investor might build a Narrative with higher long term revenue growth and stronger profit margins that supports a Fair Value well above US$34.98, while another might assume slower growth and more modest margins that lead to a Fair Value well below the current price.

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

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