The company has delivered good quarterly results but not so phenomenally good that it would justify doubling the valuation. In particular, the stock has almost doubled again since January. However, margins are improving but are still far from the level that would justify this P/S ratio. The market seems to be already pricing in this prospect as it is a scalable business model. A very high P/S valuation would be justified if the margins were excellent. The P/S ratio is not a very good valuation measure overall, but the company is still unprofitable, so we cannot use a price-earnings ratio. The EV/Sales (TTM) ratio is a very high 14X, according to Seeking Alpha. Nevertheless, the valuation is anything but cheap. In the trailing twelve months, the loss was $50M, so the company is more than adequately supplied with cash. The market cap is $6.40B, and the remaining cash is about $640M. The company is currently valued at an enterprise value of $5.78B. But even without that, margins have been improving for more than a year, as expected from a software-based asset-light business model. According to the Income statement, this interest income was $5.6M in the last quarter. The net income looks much better than the operating income because the company generates interest income due to its high cash position. The gross profit margin is strong, and the net income looks about to turn positive. I have created this overview of the income statement of the last quarter compared to the previous year, showing where money is spent and how the revenue and cost development is in general. Financial Progress & Trendsįirst, a short overview over a longer period for revenues, expenses, and net income. Among different regions, the Asia Pacific stands out as the fastest-growing market segment, driven by factors such as strong government support for education, rapid adoption of digital technology in educational facilities, fast-growing economies, initiatives to promote digital education, rising disposable incomes, and increasing internet penetration. This has significantly enhanced the learning experience, leading to heightened student engagement. Moreover, rapid technological advancements have enabled language learning applications to offer a rich multimedia educational experience, integrating texts, images, animation, audio, and video. This is fuelled by several factors, including the ongoing process of globalization, the burgeoning e-learning industry, rising investments in education, and increasing demand for multilingual employees among multinational corporations. Valued at $40.22B in 2021, the market is projected to expand at a CAGR of 10.6% from 2023 to 2028. The global language learning market, where Duolingo competes, exhibits robust growth potential. Monthly active users (MAUs) grew 47% to 72.6 million from the prior year quarter and Daily active users (DAUs) grew 62% to 20.3 million from the prior year quarter. To date, the platform has more than 500 million registered learners. The company operates on the freemium model and offers a premium service without advertising and with additional features. In total, it offers courses for 40 languages. It targets a wide range of learners, from those who want to master widely spoken languages such as English and Spanish to those interested in less common languages such as Thai or Swahili. Today, the U.S.-based company is one of the best-known language-learning apps in the world. Short company overviewĭuolingo was co-founded in 2011 by Luis von Ahn and Severin Hacker. Therefore, I have doubts about the scalability in the long run. After that, there is no reason to pay for it anymore. Overall, such an app is not something that users will pay for their entire lives but only as long as they want to learn a language. Furthermore, the business model is not endlessly scalable but operates in a competitive market environment against many options, which sometimes are even free. However, I believe the company is now clearly overvalued, and the increase in outstanding shares, stock-based compensation (SBC), and insider trading is hurting shareholders. Artur/iStock via Getty Images Investment Thesisĭuolingo ( NASDAQ: DUOL), a leading language learning platform, has many things going for it: the company improves its margins, has plenty of cash, and is close to profitability.
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