Is Pure Storage Poised for More Growth After 35% Rally and Strong Cash Flow Outlook?

Thinking about making a move with Pure Storage stock? You would not be the only one. After surging 35.4% in the last 30 days, and up an incredible 66.7% over the past year, a lot of investors are taking a closer look. Growth at that pace demands attention, even considering the recent 6.2% dip in the last week. This serves as a reminder that momentum stocks rarely move in a straight line. Over the last five years, Pure Storage has delivered a staggering 429.9% return, handily outpacing the broader market and many peers in the tech sector.

This explosive long-term growth has come in part from investors recalibrating their risk appetites around disruptive cloud and data storage companies. Market shifts toward all-flash data centers, combined with Pure’s reputation for innovative storage solutions, have kept bulls in charge more often than not.

Still, with this much optimism baked in, the question now is whether Pure Storage is fairly valued, undervalued, or priced for perfection. A quick look at the numbers shows a value score of 2 out of 6. This means Pure Storage is considered undervalued by just two of the major valuation checks analysts use. That puts us right on the edge, and it pays to dig deeper.

Next, we will break down the valuation models behind that score, and explore how they apply to Pure Storage. Stick around. Even if those classic checks leave you on the fence, there is a smarter angle for assessing value that investors often overlook, and we will cover it before wrapping up.

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

Approach 1: Pure Storage Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s dollars. This approach is especially useful for companies like Pure Storage, where rapid growth can lead to changing financial forecasts year by year.

Currently, Pure Storage generates Free Cash Flow (FCF) of around $561 million. Analyst estimates cover the next five years, with projections rising sharply each year. By 2030, FCF is expected to reach $1.55 billion. These later estimates rely on extrapolations beyond analyst consensus. Simply Wall St uses a two-stage DCF to capture both near-term analyst expectations and longer-term company growth. All figures are in US dollars.

Based on these forecasts and after discounting these future cash flows to the present, the resulting intrinsic value for Pure Storage comes out to $102.14 per share. This value is about 19.3% higher than the company’s current share price, signaling that the stock is considered undervalued by this measure.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Pure Storage is undervalued by 19.3%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Pure Storage Price vs Sales

For companies like Pure Storage, which are still ramping up profitability but seeing strong revenue growth, the Price-to-Sales (P/S) ratio is often the most reliable valuation metric. It focuses on top-line performance rather than profit, which can be volatile for high-growth tech firms reinvesting to fuel expansion.

Growth expectations and company-specific risks play a big role in what the “normal” P/S should be. Fast-growing companies tend to command higher multiples, while businesses facing stiff competition or volatile earnings get discounted lower. That is why context matters when using any valuation multiple.

Pure Storage is currently trading at a P/S multiple of 8.08x. For comparison, the average among its tech industry peers is 2.23x and the broader sector average is just 1.67x. At first glance, that hefty premium might set off alarm bells for value-focused investors.

This is where Simply Wall St’s “Fair Ratio” comes in. The Fair Ratio (11.51x for Pure Storage) is a custom metric factoring in not just industry placement, but also the company’s expected earnings growth, strong profit margin outlook, size, and specific risks. This tailored approach offers a more accurate benchmark than blanket comparisons against peers or industry averages, which might miss what makes Pure Storage unique.

Comparing the Fair Ratio (11.51x) with the current P/S (8.08x), Pure Storage appears undervalued by this measure, with room for its sales-based valuation to catch up to its growth profile.

Result: UNDERVALUED

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 Pure Storage Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple way to frame your perspective on a company by connecting their story, such as new cloud deals, product launches, or competitive challenges, to your own financial forecast for future revenue, earnings, and profit margins. This results in your unique “fair value” for the stock.

Unlike static models, Narratives blend a company’s business reality with the numbers, making your investment thesis both personal and dynamic. Narratives are easy to create and adjust on Simply Wall St’s platform, directly in the Community page used by millions of investors.

The real power of Narratives is that they help you make smarter, faster decisions by instantly comparing your Fair Value to the current share price. This can assist you in determining whether it’s time to buy, sell, or hold. In addition, Narratives automatically update every time new information, such as earnings results or major industry news, becomes available, so your thesis always stays relevant.

For Pure Storage, for example, some investors’ most optimistic narratives see ongoing enterprise cloud adoption, margin expansion, and strategic partnerships justifying a fair value above $93 per share. More cautious perspectives, however, point to competitive and margin risks placing fair value closer to $55. This shows that the right narrative is the one that matches your own view of Pure’s future.

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