Has Zscaler’s Recent 27% Pullback Created a New Opportunity for Investors in 2025?

• If you are wondering whether Zscaler at around $243 a share is still a smart buy after its massive run over the years, you are not alone. This article is here to unpack that value story with you.
• The stock is down about 3.3% over the last week and roughly 27.5% over the past month, yet it is still up 34.1% year to date and 18.1% over the last year, with an impressive 113.3% gain over three years.
• Recent headlines have highlighted Zscaler as a key beneficiary of the long term shift to zero trust security as enterprises modernize their networks and migrate more workloads to the cloud. At the same time, the broader tech selloff and changing expectations around high growth names have added extra volatility to Zscaler shares.
• On our checklist of 6 valuation tests, Zscaler scores a 3/6, suggesting it looks undervalued on some measures but not convincing across the board. Next we will walk through those different valuation lenses, and then finish by exploring a more powerful way to think about what Zscaler might really be worth over the long run.

Zscaler delivered 18.1% returns over the last year. See how this stacks up to the rest of the Software industry.

Approach 1: Zscaler Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth today by projecting the cash it can generate in the future and then discounting those cash flows back to a present value.

For Zscaler, the latest twelve month Free Cash Flow is about $854.4 Million. Analysts and extrapolated estimates used in this 2 Stage Free Cash Flow to Equity model see that figure rising steadily, with projected Free Cash Flow reaching roughly $2.26 Billion by 2030. Beyond the initial analyst forecast window, Simply Wall St extends the projections using gradually slowing growth rates to avoid unrealistically high long term assumptions.

When all those future cash flows are discounted back and summed, the model arrives at an intrinsic value of about $290.69 per share. Compared with the recent share price around $243, the DCF implies the stock is trading at roughly a 16.2% discount. This suggests it may be meaningfully undervalued based on these cash flow assumptions.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Zscaler is undervalued by 16.2%. Track this in your watchlist or portfolio, or discover 917 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 Zscaler.

Approach 2: Zscaler Price vs Sales

For fast growing, still scaling software businesses like Zscaler, the Price to Sales (P/S) ratio is often a more useful yardstick than earnings based metrics, because profits can be held back by heavy investment while revenue better reflects the underlying demand for the platform.

What counts as a reasonable P/S multiple depends on how quickly a company is expected to grow and how risky that growth appears. Higher growth and stronger competitive positioning can justify a richer multiple, while elevated risks or slowing momentum normally warrant a discount.

Zscaler currently trades on a P/S of about 13.7x, well above the broader Software industry average of roughly 4.9x and also above the peer group average near 16.0x. Simply Wall St’s proprietary Fair Ratio model, which estimates what P/S you would expect based on factors like Zscaler’s growth outlook, margins, risk profile, industry and market cap, points to a fair P/S closer to 10.9x. Because this framework bakes in company specific fundamentals rather than just comparing headline multiples, it can provide a more nuanced view than simple peer or industry comparisons. On this basis, Zscaler screens as somewhat expensive relative to its fundamentals.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Zscaler Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework on Simply Wall St's Community page that lets you attach a clear story about Zscaler’s future to the numbers you care about. It links your view of its competitive position, growth, and profitability to a concrete forecast for revenue, earnings, and margins, and from there to a fair value you can easily compare with today’s share price to decide whether it looks attractive or not. The platform keeps that Narrative up to date as new earnings, guidance, or news arrives. For example, a bullish investor who believes AI security and zero trust will drive Zscaler’s fair value closer to the upper end of community estimates around $385 can coexist with a more cautious investor who anchors on something nearer $251, and both can quickly see how changing assumptions shift their own fair value versus the current market price.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com