Assessing PagerDuty’s Valuation After a 72% Five Year Share Price Decline

• Wondering if PagerDuty is finally cheap enough to deserve a second look, especially after such a brutal few years for the stock? This is where the numbers start to get interesting.
• Despite the story stock reputation it once had, shares now sit around $12.98 after sliding about 14.0% over the last month and 30.4% over the past year, deepening a multiyear drawdown that has wiped roughly 71.8% off the price over five years.
• Recently, the market has been recalibrating expectations for high growth software names like PagerDuty as investors rotate toward profitability and cash flow resilience. That shift has pushed many former darlings into value territory by traditional metrics, putting more focus on what you are actually paying for each dollar of durable growth.
• On our framework, PagerDuty scores a 5/6 valuation check, which suggests the market might be underpricing the business on several fronts. Next, we will walk through the different valuation approaches that lead to that score before wrapping up with an even more intuitive way to think about what the stock is really worth.

Find out why PagerDuty's -30.4% return over the last year is lagging behind its peers.

Approach 1: PagerDuty Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth today by projecting its future cash flows and then discounting those cash flows back to their value in todays dollars.

For PagerDuty, the model starts with last twelve months Free Cash Flow of about $110.7 Million and builds a two stage forecast. Analyst estimates drive the first few years, with Free Cash Flow projected to reach roughly $147.0 Million by 2028, while later years are extrapolated by Simply Wall St, rising to about $212.4 Million by 2035.

Using these projected cash flows and an appropriate discount rate, the model arrives at an intrinsic value of roughly $26.92 per share. Versus the current price near $12.98, the DCF estimates that the stock is about 51.8% undervalued. This indicates that the market may be heavily discounting PagerDuty relative to its expected cash generation.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests PagerDuty is undervalued by 51.8%. Track this in your watchlist or portfolio, or discover 918 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 PagerDuty.

Approach 2: PagerDuty Price vs Earnings

For profitable companies like PagerDuty, the price to earnings, or PE, ratio is a straightforward way to gauge how much investors are willing to pay for each dollar of profit. A higher PE usually reflects stronger growth expectations or lower perceived risk, while a lower PE can indicate slower growth, higher risk, or a potential bargain if the outlook is better than the market assumes.

PagerDuty currently trades on a PE of about 7.80x, which is dramatically below both the Software industry average of roughly 31.51x and the broader peer group at around 30.63x. On the surface, that kind of discount suggests the market is skeptical about the durability of its earnings or growth.

Simply Wall St tackles this by estimating a Fair Ratio for PagerDuty of 8.98x. This is a proprietary PE level that reflects its specific earnings growth profile, margins, risk factors, industry and market cap. This measure is more tailored than simple peer or industry comparisons, which can overlook important differences in quality and risk. With the Fair Ratio sitting modestly above the current 7.80x, the multiple based view points to PagerDuty being undervalued on earnings.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1455 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your PagerDuty Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce Narratives, a simple way for you to attach a clear story about PagerDuty to the numbers you believe in, including its future revenue, earnings, margins and fair value. A Narrative links your view of the business, such as how AI agents, AWS recognition and pricing shifts might play out, to a concrete financial forecast and then to a Fair Value that you can easily compare with today’s share price as you consider your own potential investment decisions. On Simply Wall St, Narratives live in the Community page and are used by millions of investors, giving you an accessible tool that updates dynamically whenever new information like earnings, guidance or product launches hits the market. For PagerDuty, one investor might build a Narrative with a Fair Value above $22.0 based on expectations of stronger AI related demand, while another might take a more cautious stance closer to $16.0, and the platform helps you see, test and refine which story you personally find most useful.

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

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