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• Ever wondered if monday.com is actually a hidden bargain or just riding a wave of hype? Let’s break down what is really driving the stock’s value so you can draw your own conclusion.

• After a short-term rebound of 3.2% in the last week, monday.com shares are still down 27.0% over the past month and a significant 35.1% year-to-date. This performance hints at shifting market perceptions and raises fresh questions around its long-term prospects.

• Recent headlines have highlighted increased adoption of monday.com’s work management platform among enterprise clients, along with partnerships that are expanding its international reach. At the same time, investors are considering growing competition in the software sector and the implications this may have for future growth.

• On valuation, monday.com scores 3 out of 6 on our valuation checks. This mixed showing leaves plenty to discuss. Next, we will run through the usual ways to spot value in a stock, but stick around for a smarter approach revealed later in the article.

Find out why monday.com’s -45.4% return over the last year is lagging behind its peers.

The Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and then discounting them back to today’s value. This approach helps investors gauge whether a stock is trading at an attractive price compared to its anticipated ability to generate cash in the future.

For monday.com, the latest reported Free Cash Flow stands at $331 million. Analysts foresee robust growth, with projected Free Cash Flow rising to about $749 million by 2029. Looking even further, extrapolated forecasts suggest Free Cash Flow could surpass $1.2 billion by 2035. These forecasts start with analyst estimates for the next five years, while longer-term projections use reasonable growth assumptions tailored by Simply Wall St.

According to the DCF analysis, the estimated intrinsic value of monday.com’s shares is $211.44. This figure implies the stock is trading at a 29.1% discount compared to what the company is truly worth. This may signal that investors are underpricing its long-term potential based on cash flows today.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests monday.com is undervalued by 29.1%. Track this in your watchlist or portfolio, or discover 923 more undervalued stocks based on cash flows.

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

The Price-to-Earnings (PE) ratio is a popular way to value profitable companies because it directly relates a company’s share price to its earnings, allowing investors to see how much they are paying for each dollar of profit. For established, consistently profitable businesses like monday.com, the PE ratio helps put the current share price in context with not only recent performance but also anticipated growth and potential risks.

Growth expectations and perceived risk play a critical role in what counts as a “normal” or “fair” PE ratio. Companies expected to grow faster or that face lower risks typically command higher PE ratios, as investors are willing to pay more for each dollar of current earnings to benefit from future gains. Conversely, riskier or slower-growing companies tend to have lower PE ratios.

Currently, monday.com’s PE ratio stands at 118.8x, which is much higher than the industry average of 31.8x and its peer average of 36.8x. These benchmarks provide a useful starting point for comparison, but they do not account for company-specific strengths or weaknesses.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in. The Fair Ratio, calculated at 43.6x for monday.com, considers the company’s earnings growth potential, competitive landscape, profit margins, size, and business risks. This holistic approach delivers a more nuanced and realistic estimate of what monday.com’s PE ratio should be, rather than just relying on broader industry or peer averages.

By comparing monday.com’s actual PE of 118.8x to the Fair Ratio of 43.6x, the stock appears to be trading at a premium far above what would be justified by its fundamentals alone, according to this model.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. Narratives are personalized stories investors create to connect their perspective on a company, such as expected revenue growth, future profit margins, and competitive advantages, to a specific financial forecast and resulting fair value. This unique approach allows you to capture your outlook and assumptions, linking the company’s story to a dynamic estimate of fair value, rather than relying solely on static ratios or past performance.

On Simply Wall St’s Community page, millions of investors use Narratives to break down complex data into accessible, actionable insights. Narratives make it easy to see how fair value compares with the current market price, guiding you on whether now might be a good time to buy or sell. Importantly, Narratives update automatically as new news or company results emerge, keeping insights fresh and relevant.

For example, with monday.com, some investors believe aggressive upmarket expansion justifies a bullish fair value as high as $450 per share, while others focus on competitive risks and more cautious growth, yielding fair values closer to $205. Narratives empower you to map your own story to the latest numbers and then act on it confidently.

Do you think there’s more to the story for monday.com? 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.

Companies discussed in this article include MNDY.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com