Is Duolingo, Inc. overvalued or undervalued?

As of 27 February 2025, Duolingo, Inc. has moved from a fair to expensive valuation grade, indicating that the stock is overvalued. The company currently has a P/E ratio of 239, significantly higher than its peers, such as Robinhood Markets, Inc. with a P/E of 41.60, and Toast, Inc. at 145.27. Additionally, Duolingo's EV to EBITDA stands at 268.26, which is also elevated compared to the industry average, suggesting that investors are paying a premium for its earnings.
In light of these ratios, Duolingo appears overvalued when compared to its peers, particularly with a PEG ratio of 2.36, indicating that growth expectations may not justify the high valuation. While the company has shown impressive returns over the past year, outperforming the S&P 500 with a 117.19% return compared to the index's 10.26%, the current valuation metrics suggest that investors should approach with caution.