Is Duolingo, Inc. overvalued or undervalued?

As of 17 October 2025, the valuation grade for Duolingo, Inc. has moved from expensive to very expensive, indicating a significant increase in perceived overvaluation. The company is considered overvalued based on its high valuation ratios, including a P/E ratio of 239, an EV to EBITDA of 268.26, and a Price to Book Value of 26.09. In comparison, peers such as monday.com Ltd. exhibit a P/E of 242.18 and SPS Commerce, Inc. shows a more reasonable P/E of 52.78, highlighting Duolingo's elevated valuation relative to its industry.
Despite a strong three-year return of 272.78%, which significantly outperformed the S&P 500's 81.19%, the recent performance shows a decline of 0.3% over the past week compared to a 1.70% gain in the S&P 500. This suggests that while Duolingo has had impressive long-term returns, its current valuation may not be justified given the recent market dynamics.