A Fresh Look at Workday (WDAY) Valuation Following Strong Earnings and New Product Announcements

Workday (WDAY) just rolled out financial results that beat expectations while also raising its outlook for the next quarter and year. In addition, the company unveiled several product expansions and new partnerships aimed at driving innovation and efficiency.

See our latest analysis for Workday.

Workday shares have seen some turbulence lately, with the stock down 15.3% year-to-date and posting a 17% total shareholder return loss over the past year. Despite these short-term dips, the company's ambitious partnerships and product rollouts continue to highlight building momentum for longer-term growth.

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After solid results, upgraded guidance, and a string of product and partnership announcements, investors are left to consider whether Workday's current valuation reflects all this momentum, or if there could be an overlooked buying opportunity.

Most Popular Narrative: 23.1% Undervalued

Workday's widely-followed narrative values shares 23.1% higher than the last close price, highlighting the fundamental disconnect between analyst optimism and recent share underperformance. This perspective draws on robust growth assumptions that sharply contrast with market sentiment.

"Broad adoption of Workday's AI-enabled HR and finance products (with >70% of customers using Workday Illuminate and >75% of net new deals including at least one AI product), along with acquisitions like Paradox and Flowise, is fueling cross-sell/upsell activity, increasing average contract values and bolstering future topline growth."

Read the complete narrative.

Wondering what’s behind this bullish case? The real story lies in bold profit forecasts, transformative technology momentum, and aggressive long-range assumptions that could upend the standard valuation playbook. Prepare to challenge the status quo and see what’s driving the numbers.

Result: Fair Value of $277.28 (UNDERVALUED)

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

However, fierce competition from new AI-powered software and tightening regulations could quickly challenge Workday’s current growth outlook. This could also reshape investor expectations.

Find out about the key risks to this Workday narrative.

Another View: The Multiples Perspective

While fair value models paint Workday as undervalued, traditional valuation ratios tell a different story. The stock currently trades at an 87.4x earnings multiple, which is notably higher than both the US software industry average (32x) and its own fair ratio of 48.8x. This steep premium signals heightened valuation risk if growth fails to accelerate as expected. Could the market be getting ahead of itself, or does this optimism foreshadow future results?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Workday Narrative

If you want a different perspective or want to dive into the numbers yourself, building your own narrative takes just a few minutes. Do it your way.

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

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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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