Analyzing Yext Stock After AI Search Platform Expansion and Strong 32% Yearly Gain

If you have been eyeing Yext and wondering whether now is the right time to act, you are not alone. The stock has had quite a ride over the last few years, and its most recent moves have left plenty of investors scratching their heads but also seeing signs of opportunity. After a slight dip of 1.7% over the last seven days, Yext is still holding onto a steady climb of 6.9% for the past month. If you zoom out, the year-to-date performance shines at an impressive 32.3% gain, with the last twelve months returning a very solid 33.1%. However, if you stretch that timeline to five years, you will see a loss of 45.4%, highlighting just how turbulent this stock’s journey has been.

Much of the recent positive momentum may be tied to market sentiment shifting in favor of cloud and software-based businesses, as investors look for efficiency plays amid evolving digital trends. Yext’s own transition and adaptations to these trends seem to be part of what is attracting fresh interest, driving the stock higher even as some still remember the painful setbacks of previous years.

Valuation-wise, Yext currently scores a 2 out of 6 based on widely recognized undervaluation checks, which means that by standard measures, the company appears undervalued in a couple of important ways but is not a screaming bargain across the board. Here’s where things get interesting. While traditional valuation approaches can tell us a lot, stick around because, by the end of this article, we will look at a more insightful way to determine whether Yext really deserves your attention.

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

Approach 1: Yext Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model projects a company’s future cash flows and then discounts them back to their present value. This offers an estimate of intrinsic worth today. This method is widely used for growth-oriented companies where potential future earnings play a significant role in valuation.

For Yext, the DCF model relies on its current Free Cash Flow (FCF) of $65.7 million and uses analyst forecasts to estimate how this number will develop. Over the next five years, analyst projections suggest steady gains, with FCF reaching $110 million by 2030. It is worth noting that independent analysts only supply direct FCF estimates for the first half of this window. After this period, Simply Wall St extrapolates further growth based on recent trends and industry practices.

According to this approach, Yext’s fair intrinsic value is $13.41 per share, which is around 35.5% above where the stock trades today. This suggests that, based on expected future cash flows, the shares are meaningfully undervalued at current levels.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Yext is undervalued by 35.5%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Yext Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used yardstick for valuing profitable companies, as it directly ties the stock price to the company’s actual earnings. For businesses that are consistently profitable, the PE ratio can indicate how much investors are willing to pay for each dollar of earnings, making it especially useful for comparing valuations across companies within the same sector.

Of course, what counts as a “normal” PE depends on a company’s growth prospects and its perceived risks. High-growth firms often justify higher PE ratios because investors expect earnings to climb more rapidly in the future. Conversely, companies with steadier or riskier earnings typically command lower PE ratios compared to peers.

Looking at Yext, its current PE ratio is an eye-catching 143.1x, which is far higher than the software industry average of 34.9x and well above its selected peer group average of 60.7x. On the surface, this suggests that the market has priced in exceptionally strong growth or other positive factors. However, Simply Wall St’s proprietary “Fair Ratio” model, which considers Yext’s own earnings growth, margins, market cap, and sector-specific risks, estimates a fair PE of 39.7x for the company. This metric provides a more tailored benchmark than just matching the broad industry or peer averages, as it captures the nuances unique to Yext’s situation.

With a current PE more than triple its Fair Ratio, Yext appears significantly overvalued by this method.

Result: OVERVALUED

PE 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 Yext Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is essentially your own story or perspective about a company, where you connect what you believe about Yext’s business, industry changes, risks, and future potential, with your estimates for key numbers like future revenue, margins, and fair value.

Instead of just relying on broad financial ratios, a Narrative links your view of Yext’s journey. For example, you might consider how you see its AI-powered product launches, customer growth, or market risks, and directly connect these points to a concrete financial forecast and a clear assessment of what the shares are really worth today.

Narratives are easy to build and compare on Simply Wall St’s Community page, where millions of investors share, debate, and update their perspectives as new information comes in, such as quarterly results or major news. This allows your Narrative to adapt quickly and helps you make more informed buy or sell decisions by simply comparing your Fair Value to the current share price.

For Yext, some investors may use a bullish Narrative, expecting strong AI-driven revenue growth and fair value above $10, while others may focus on competitive risks and assign a more cautious fair value closer to $8.25.

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

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