Could Freshworks Stock’s Cash Flow Spark the Next Rally?

We think Freshworks (FRSH) 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.

What Is Happening With FRSH

FRSH stock is available at a significant discount to its 3-month, 1-year, and 2-year highs. This can be attributed to a notable deceleration in overall customer acquisition and annual recurring revenue growth rates in late 2025. Furthermore, the 2026 revenue guidance, while exceeding some analyst estimates, disappointed market expectations for significant AI-driven expansion.

The stock may not reflect it yet, but here is what’s going well for the company: Freshworks achieved its first GAAP profitable year in 2025, generating $223 million in free cash flow, projected to reach $250 million in 2026, and boasts a 0% debt-to-equity ratio. Growth drivers include a 28% increase in customers with over $100,000 ARR, a 26% growth in Employee Experience ARR to $510 million, and a net dollar retention rate of 108% driven by AI adoption.

FRSH Has Strong Fundamentals

• Cash Yield: Freshworks offers an impressive cash flow yield of 9.1%.
• Growing: Revenue growth of 16.4% over the last twelve months means that the cash pile is going to grow.
• Valuation Discount: FRSH stock is currently trading at 36% below its 3-month high, 48% below its 1-year high, and 56% below its 2-year high.

Below is a quick comparison of FRSH fundamentals with S&P medians.

*LTM: Last Twelve Months

But What About The Risk Involved?

While FRSH stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. FRSH fell about 78% during the Inflation Shock. That’s a massive hit, even with all the positives around the company. It shows that no matter how strong the fundamentals look, severe market stress can still trigger big losses. Past crises have a way of shaking things up hard, reminding us that risk is always lurking, even for stocks with solid stories. 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 FRSH 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 FRSH Stock.

Other Stocks Like FRSH

Not ready to act on FRSH? You could consider these alternatives:

1. Oracle (ORCL)
2. AppLovin (APP)
3. Carvana (CVNA)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Positive revenue growth
3. High free cash flow yield
4. 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 performed as follows:

• Average 6-month and 12-month forward returns of 25.7% and 57.9% respectively
• Win rate (percentage of picks returning positive) of >70% for both 6-month and 12-month periods

The Right Way To Invest Is Through Portfolios

Single stocks swing wildly but staying invested matters. A well built portfolio helps you stay invested, captures upside and softens the blows from individual stocks.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? HQ Portfolio has posted more than 105% in cumulative return since inception, with less risk versus the benchmark index, as evident in HQ Portfolio performance metrics.