Cash Machine Trading Cheap – Duolingo Stock Set to Run?
We think Duolingo (DUOL) stock is worth a look: It is growing, producing cash, and available at a significant valuation discount. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market.
The stock is available at a significant discount to its 3-month, 1-year, and 2-year highs.
DUOL Has Strong Fundamentals
- Cash Yield: Duolingo offers an impressive cash flow yield of 8.1%.
- Growing: Revenue growth of 38.7% over the last twelve months means that the cash pile is going to grow.
- Valuation Discount: DUOL stock is currently trading at 48% below its 3-month high, 82% below its 1-year high, and 82% below its 2-year high.
Below is a quick comparison of DUOL fundamentals with S&P medians.
| DUOL | S&P Median | |
|---|---|---|
| Sector | Consumer Discretionary | – |
| Industry | Education Services | – |
| Free Cash Flow Yield | 8.1% | 4.3% |
| Revenue Growth LTM | 38.7% | 6.8% |
| Operating Margin LTM | 13.1% | 18.6% |
| PS Ratio | 4.3 | 3.2 |
| PE Ratio | 10.8 | 23.9 |
| Discount vs 3-Month High | -48.0% | -12.3% |
| Discount vs 1-Year High | -82.2% | -14.8% |
| Discount vs 2-Year High | -82.2% | -17.1% |
*LTM: Last Twelve Months
But What About The Risk Involved?
While DUOL stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. Duolingo took a hit of nearly 69% during the 2022 inflation shock. That’s a pretty sharp drop, especially considering all the tailwinds in the edtech space. It shows that even solid growth stories can suffer major sell-offs when market sentiment turns. Risk doesn’t disappear just because the fundamentals look good. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read DUOL Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
If you want to see more details, read Buy or Sell DUOL Stock.
Other Stocks Like DUOL
Not ready to act on DUOL? You could consider these alternatives:
These stocks have positive revenue growth, high free cash flow yield, and are trading at a meaningful discount to 3M, 1Y, and 2Y highs.
A portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have resulted in average 6-month and 12-month forward returns of 25.7% and 57.9% respectively, with win rate (percentage of picks returning positive) of above 70%.
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