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Zscaler (ZS) Stock May Be 29% Undervalued Despite Cybersecurity Selling

Simply Wall St · 2d ago

Zscaler has seen its share price under pressure over the past year, and the swing in sentiment now puts the focus squarely on whether the current valuation matches what its cash flows can support. With a Discounted Cash Flow (DCF) view available, the core issue is how the recent share price reset lines up with the cash the business is expected to generate over time.

  • Over the past 5 years the stock has fallen 41.6%, which raises the question of how much of the cash flow outlook the market has already repriced.
  • Recent selling in cybersecurity stocks following sector-wide concerns about enterprise security spending and deal timing may affect how quickly Zscaler converts expected growth into future cash flows.
  • Prefer to judge Zscaler on sales? See why Zscaler's 9.9x P/S tells a different valuation story.

The issue now is whether the current US$203.88 share price is adequately supported by Zscaler's cash flows when viewed through a Discounted Cash Flow lens.

To test whether Zscaler's recent share price drop aligns with what you are paying for its cash flows, compare it with companies in the 42 high quality undervalued stocks

Is Zscaler a Bargain on Cash Flow?

The Discounted Cash Flow (DCF) framework here is built on Zscaler turning current cash generation into steadily larger future streams. Latest twelve month free cash flow sits at about $805.9 million, and the model carries this forward with a growing profile that lifts annual free cash flow projections into the low single digit billions of dollars by the early 2030s.

On those assumptions, the DCF output suggests Zscaler’s estimated intrinsic value is meaningfully above the current US$203.88 share price, so the recent pullback has not fully closed the gap between price and cash flow projections. Sector wide selling in cybersecurity, triggered by concerns around enterprise security budgets, helps explain why the market keeps the stock below what the Discounted Cash Flow (DCF) projections imply today, even with positive free cash flow already in place. Find out what Zscaler could be worth using our Discounted Cash Flow (DCF) estimate.

The Zscaler Narrative: What Would Justify Today's Price?

Zscaler’s Narratives on Simply Wall St pick up exactly where this valuation puzzle leaves off. They set out what mix of future growth, profitability and earnings power would need to play out for the stock to be worth materially more or materially less than today’s price. Each narrative ties its number to a specific view on how Zscaler's expansion, margins and risks might evolve, giving you something you can revisit as new information comes through.

Community views on Zscaler split between those who think AI security can expand its role and those who think execution risk keeps expectations too high.

Bull case: 18% undervalued

"Historically, the company monetized employees accessing applications. Increasingly, it is monetizing workloads, branches, IoT devices, data, AI models and AI agents..."

Discover why this Narrative puts Zscaler at 18% undervalued.

Bear case: 20% overvalued

"The current valuation suggests that Zscaler is priced for very strong long term ARR expansion and margin delivery, which leaves limited room for disappointment if growth or execution slip..."

Explore why this Narrative puts Zscaler at 20% overvalued.

One more angle on Zscaler that could change how you see it

Cash flow models only tell part of the story. The people deciding where every new dollar goes, and how they are rewarded for those choices, can tilt outcomes in very different directions. See who runs Zscaler and how they are paid.