Duolingo (DUOL): Buy, Sell, or Hold Post Q2 Earnings?

Over the past six months, Duolingo’s stock price fell to $299.50. Shareholders have lost 9.2% of their capital, which is disappointing considering the S&P 500 has climbed by 15.5%. This might have investors contemplating their next move.

Following the pullback, is now the time to buy DUOL? Find out in our full research report, it’s free.

Why Are We Positive On Duolingo?

Founded by a Carnegie Mellon computer science professor and his Ph.D. student, Duolingo (NASDAQ:DUOL) is a mobile app helping people learn new languages.

1. Monthly Active Users Skyrocket, Fueling Growth Opportunities

As a subscription-based app, Duolingo generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.

Over the last two years, Duolingo’s monthly active users, a key performance metric for the company, increased by 36.5% annually to 128.3 million in the latest quarter. This growth rate is among the fastest of any consumer internet business and indicates its offerings have significant traction.

2. Outstanding Long-Term EPS Growth

We track the change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Duolingo’s full-year EPS flipped from negative to positive over the last three years. This is a good sign and shows it’s at an inflection point.

3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Duolingo has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the consumer internet sector, averaging an eye-popping 35% over the last two years.

Final Judgment

These are just a few reasons why we're bullish on Duolingo. After the recent drawdown, the stock trades at 42.9× forward EV/EBITDA (or $299.50 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.

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