Assessing Circle Stock After 27% Rally and Record Growth in Digital Payments

If you are thinking about what to do with Circle Internet Group stock these days, you are certainly not alone. With shares up 9.1% in the last week and a remarkable 27.3% in the last month, the company has caught a fair bit of attention. Year to date, the move is even more striking, with the stock gaining 75.2%. Momentum like this usually sparks two key questions: is this just the beginning, or is the price already getting ahead of itself?

Recently, interest in Circle Internet Group has risen on the back of broad market moves within the fintech space, with investor appetite for digital payments and online financial services ramping up. While there have not been blockbuster news events directly boosting the stock, the entire sector has benefited from renewed optimism about future growth possibilities and appetite for technology-driven financial solutions. This may be contributing to the run-up in share price.

But do these jumps make Circle’s shares a bargain, or have they become expensive? When we ran the numbers, the company scored a 0 out of 6 on our standard valuation checks, meaning it does not appear undervalued by any of our primary measures right now. Of course, that is just a starting point. Next, we will walk through the key valuation methods analysts look at, and stick around to the end, because we will highlight an even smarter way to think about what Circle Internet Group is really worth.

Circle Internet Group scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Circle Internet Group Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates what a company is worth by projecting its future cash flows and then "discounting" them back to today's value. This approach gives investors an idea of the intrinsic value of the business based on its ability to generate cash over time.

For Circle Internet Group, the most recent reported Free Cash Flow stands at $461.0 Million. Analysts provide cash flow forecasts out to 2029, with projections reaching $1.42 Billion by the end of that year. After that, future cash flows are extrapolated based on sector trends and company fundamentals. The DCF model used here, specifically the 2 Stage Free Cash Flow to Equity method, incorporates both analyst estimates and long-term growth assumptions, all expressed in dollars.

Aggregating these projections, the model estimates Circle's intrinsic value per share at $136.87. With the current market price running roughly 6.5% above this fair value, the stock is considered slightly overvalued using the DCF method.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Circle Internet Group.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Circle Internet Group's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Circle Internet Group Price vs Sales

The Price-to-Sales (P/S) ratio is a common valuation metric for technology companies that may not yet generate steady profits but are growing revenue rapidly. Because Circle Internet Group is reinvesting heavily into growth and not recording positive net earnings, the P/S multiple provides a clear and relevant snapshot of how the market is pricing its future revenue potential compared with peers.

Growth expectations and risk play a crucial role in what is considered a “normal” or “fair” P/S ratio. Companies with higher revenue growth and more stable businesses usually command higher multiples, while those with elevated risk or lower growth warrant a discount.

Currently, Circle Internet Group trades at a P/S multiple of 15.93x. This is considerably above both the industry average of 5.29x and the peer average of 12.30x. At first glance, this suggests the stock is priced at a premium to typical software peers.

The “Fair Ratio” is a proprietary metric developed by Simply Wall St that determines what a suitable P/S ratio should be for this specific company. Unlike standard industry or peer benchmarks, the Fair Ratio takes into account Circle's revenue growth outlook, risks, profit margins, market cap and overall industry environment. This offers a more tailored and objective valuation target.

In this case, Circle Internet Group’s P/S ratio is only slightly above its Fair Ratio, which means the premium is justified by the company’s fundamentals. This suggests the shares are trading at roughly fair value based on growth and risk-adjusted revenue expectations.

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 Circle Internet Group Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. Narratives are simply the story you build about a company, connecting your unique perspective and expectations about its future revenue, profits, margins, and risks to an actual fair value calculation. On Simply Wall St’s Community page, millions of investors use Narratives to tell their version of the Circle Internet Group story and see where it leads financially. This makes it easy to compare your fair value to the current share price, helping you decide if now is the time to buy, hold, or sell. Best of all, Narratives update automatically whenever new news or earnings data is released, so your viewpoint stays fresh. For example, some investors think Circle will justify a high share price due to regulatory wins and global adoption, while others forecast a much lower fair value due to rising risks and regulatory constraints. Both perspectives create different Narratives, highlighting how your investment decisions can be powered by your own story, not just raw numbers.

Do you think there's more to the story for Circle Internet Group? 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.

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