Is Workday at a Discount After Recent Strategic Partnerships and Price Drop?

• Wondering whether Workday's recent price is a bargain, overblown, or somewhere in the middle? If you're searching for the real story behind the numbers, you're not alone.
• Workday’s stock has seen fluctuations recently. It lost 2.5% in the past week, 7.3% over the last month, and is down 10.6% year-to-date. Despite this, it still reflects a 51.1% gain over the past three years.
• Investors have been digesting news about strategic partnerships and expansions. This has fueled speculation about the company's ability to sustain long-term growth. Recent announcements about new collaboration tools and extended service offerings have kept Workday in the headlines and sparked conversations about its competitive edge.
• On our simple value check, Workday scores 3 out of 6, which suggests some signs of undervaluation but also some areas of caution. We will break down what drives this score, explore how analysts traditionally value the stock, and, in the end, reveal a smarter way to approach valuation for the bigger picture.

Find out why Workday's -15.9% return over the last year is lagging behind its peers.

Approach 1: Workday Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and then discounting those back to today's dollars. This approach helps gauge how much a business is truly worth based on its expected ability to generate cash.

For Workday, the DCF analysis uses its latest Free Cash Flow (FCF), which stands at $2.32 billion. Analyst forecasts extend out for the next five years, with projections showing steady growth. For example, by 2030, Simply Wall St extrapolates Workday’s FCF reaching $5.02 billion annually, with intermediate estimates at each year along the path based on analyst and model sources.

Based on these cash flow projections, the DCF model calculates Workday’s intrinsic value at $343.71 per share. Currently, this suggests the stock is trading at a 34.5% discount to its fair value. In other words, Workday appears undervalued when measured against what its future cash flows could be worth today.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Workday is undervalued by 34.5%. Track this in your watchlist or portfolio, or discover 927 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 Workday.

Approach 2: Workday Price vs Earnings

For profitable companies like Workday, the Price-to-Earnings (PE) ratio is a popular way to gauge valuation because it ties the company’s share price to its bottom-line profits. Investors often look to the PE ratio to see how much they are paying for each dollar of earnings. This is especially relevant for established firms generating consistent profit.

It’s important to remember that a higher PE ratio can be justified by fast growth expectations or lower risk. A lower ratio may signal weaker growth or higher uncertainty. The “right” PE, then, is shaped by the company’s growth prospects, stability, and how it compares within its sector.

Right now, Workday’s PE ratio stands at 103.1x. By comparison, the average for its peers is 57.2x and the broader software industry average is just 28.8x. At first glance, this makes Workday look quite expensive relative to both its direct competitors and the sector.

Simply Wall St’s proprietary “Fair Ratio” offers another perspective. The Fair Ratio for Workday, calculated at 52.7x, reflects what investors might reasonably pay given the company’s earnings growth, margin profile, size, risk, and industry factors. This approach provides a more complete picture than simply comparing raw ratios because it accounts for why Workday may deserve a premium or discount.

Comparing the Fair Ratio at 52.7x to the current PE of 103.1x reveals a sizable gap. This suggests that Workday’s shares are trading well above what would typically be considered fair based on its fundamentals.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1430 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Workday Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your perspective or "story" for a company, expressed through the numbers you believe are most likely for future revenue, earnings, profit margins, and ultimately fair value. Narratives bring together the company's business context, your financial forecast, and a valuation in a way that makes the decision process both personal and data-driven.

On Simply Wall St's Community page, Narratives are easy and accessible tools trusted by millions of investors. They help you connect what you know about a company to a projected fair value, offering a structured way to track your logic and compare it with others. As new news or earnings releases come in, Narratives update dynamically, keeping your view and your watchlist aligned with reality.

For example, some investors are bullish on Workday, projecting strong AI-driven growth and setting fair value above $340 per share, while others are more cautious about competition and margin risks and set it closer to $220. Narratives help you see the full range of perspectives behind every move in price, enabling you to decide confidently if and when to buy or sell by comparing your own fair value to the current market price.

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