Is Unity Stock Still Attractive After Its 2025 Rally and Cash Flow Outlook?

• If you are wondering whether Unity Software is still a bargain after its big rebound, or if the easy money has already been made, this breakdown will help you think through whether the current price really makes sense.
• The stock has climbed 9.8% over the last week, 13.6% over the past month, and is now up 99.8% year to date. However, the 5 year return of -66.6% is a reminder of how quickly market sentiment around Unity can swing.
• Recent price action has come alongside ongoing investor interest in real time 3D platforms and generative AI tools, as markets reassess which software names could become long term infrastructure winners. At the same time, Unity continues to refine its business mix and strategy after a turbulent few years, which is keeping both optimism and skepticism elevated.
• Based on our checks, Unity scores just 2 out of 6 for being undervalued. In this breakdown, we will look at what different valuation methods are indicating, then finish by considering a more holistic way to judge whether the current market price reflects the full story.

Unity Software scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Unity Software Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by projecting its future cash flows and then discounting those back to today in $ terms.

For Unity, the latest twelve month Free Cash Flow stands at about $373.4 million. Analysts and internal estimates expect this to grow steadily, with projections reaching roughly $1.1 billion of Free Cash Flow by 2029 and continuing to climb in the following years based on a 2 Stage Free Cash Flow to Equity framework. Earlier years lean more on analyst forecasts, while the outer years are extrapolated by Simply Wall St using gradually slowing growth assumptions.

When all those projected cash flows are discounted back, the model arrives at an intrinsic value of around $52.53 per share. Compared with the current market price, this implies Unity is about 6.8% undervalued, suggesting that most of the good news is already reflected but there is still a small margin of upside.

Result: ABOUT RIGHT

Unity Software is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

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

Approach 2: Unity Software Price vs Sales

For a company like Unity that is still working toward consistent profitability, the price to sales multiple is a useful way to gauge valuation because it focuses on revenue scale and growth rather than volatile earnings.

In general, faster revenue growth and stronger competitive advantages can justify a higher price to sales ratio, while higher risk, weaker margins or slower growth usually call for a lower, more conservative multiple.

Unity currently trades at about 11.62x sales, noticeably above the broader Software industry average of roughly 5.06x and a little below the selected peer group average of about 12.42x. To move beyond these simple comparisons, Simply Wall St uses a proprietary Fair Ratio, which estimates what Unity’s price to sales multiple should be once factors like its growth outlook, margins, industry positioning, market cap and risk profile are all considered.

This Fair Ratio for Unity stands at around 8.67x, which is well below the current 11.62x. This indicates the market is already pricing in a generous growth and quality premium relative to what these fundamentals might justify.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1446 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Unity Software 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 translated into concrete numbers like fair value, future revenue, earnings and margins. A Narrative connects three things in a straight line: what you believe about a company’s business, how that belief shows up in a financial forecast, and the fair value that drops out of those assumptions. Narratives on Simply Wall St are easy to build and explore on the Community page, where millions of investors already use them to compare their view of fair value to the current share price and decide whether a stock looks like a buy, hold, or sell. Because Narratives are updated dynamically as new information arrives, such as earnings releases or major product announcements, your valuation view can evolve in real time instead of sitting static in a spreadsheet. For Unity for example, one investor might see a fair value near $31.67 based on cautious growth and margin assumptions, while another might lean closer to $44.00 if they expect faster adoption of AI tools and stronger long term profitability.

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