• Wondering if Twilio's current share price lines up with its real worth, or if the market is getting ahead of itself.
• Twilio recently closed at US$143.79, with returns of 2.6% over 7 days, 14.6% over 30 days, 3.9% year to date, 51.2% over 1 year and 173.3% over 3 years, while the 5 year return sits at a 60.9% decline.
• Recent headlines have focused on Twilio's position in cloud communications and customer engagement, including product updates and partnerships that keep the company in focus for both retail and institutional investors. This context helps explain why sentiment around the stock can shift quickly as the story develops.
• Twilio currently has a valuation score of 2 out of 6, so the rest of this article will walk through how different valuation approaches frame that score and then point to an even better way to think about value at the end.

Twilio scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Twilio Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting its future cash flows and discounting them back to what they could be worth in $ today.

For Twilio, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $941.1 million. Analysts provide detailed free cash flow estimates out to 2029, and Simply Wall St then extrapolates beyond that, including a projection of $1,537.3 million in 2030. These yearly projections are discounted back to today using the model’s chosen rate to reflect risk and the time value of money.

Combining all of those discounted cash flows gives an estimated intrinsic value of about $160.17 per share. Compared with the recent share price of $143.79, the model implies Twilio trades at roughly a 10.2% discount. On this view, the stock screens as undervalued rather than expensive.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Twilio is undervalued by 10.2%. Track this in your watchlist or portfolio, or discover 56 more high quality undervalued stocks.

Approach 2: Twilio Price vs Sales

For companies where earnings are less useful as a guide, the P/S ratio can be a practical way to gauge how much you are paying for each dollar of revenue, especially in software and IT where reinvestment can keep profits thin.

Growth expectations and risk still matter here, because a higher P/S can sometimes be justified for a business with stronger expected expansion and a business model that investors view as more resilient, while higher perceived risk usually supports a lower, more cautious multiple.

Twilio currently trades on a P/S of 4.30x, compared with the broader IT industry average of 1.82x and a peer group average of 7.69x. Simply Wall St’s Fair Ratio for Twilio stands at 4.02x. This reflects a proprietary assessment of what a reasonable P/S might look like, given factors such as earnings growth profile, industry, profit margins, market capitalization and company specific risks.

This Fair Ratio can be more informative than a simple peer or industry comparison because it anchors the multiple to Twilio’s own fundamentals rather than assuming that the rest of the sector is correctly priced.

With an actual P/S of 4.30x versus a Fair Ratio of 4.02x, the shares screen as slightly expensive on this measure.

Result: OVERVALUED

P/S ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 19 top founder-led companies.

Upgrade Your Decision Making: Choose your Twilio Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Meet Narratives, a simple tool on Simply Wall St’s Community page that lets you link your view of Twilio’s story to a clear financial forecast and a fair value, then compare that fair value with the current share price to help you decide whether the stock looks attractive or not.

With a Narrative, you spell out your expectations for Twilio’s future revenue, earnings and margins in plain language. Those inputs flow into a model that produces a fair value per share, and the platform then updates that view automatically as fresh information like earnings releases or news arrives.

For example, one Twilio Narrative on the platform currently anchors to a fair value of about US$68 per share, while another sits around US$185. This shows how two investors can look at the same company and, based on different revenue growth and profit margin assumptions, reach very different conclusions about what Twilio is worth today.

For Twilio, however, we will make it really easy for you with previews of two leading Twilio Narratives:

Fair value: US$185.00

Market price vs this fair value: around 22.3% below the narrative fair value

Assumed revenue growth: 11.98% a year

• Sees Twilio as a key infrastructure provider for AI driven customer engagement, messaging and voice globally, with partnerships and omnichannel products supporting that view.
• Builds in higher revenue growth and margin expansion than consensus, with earnings forecasts that imply a future P/E of 45.7x on 2029 earnings using a 9.06% discount rate.
• Flags material risks around regulation, competition, large customer behavior and spending needs, and encourages you to test the bullish analyst assumptions against your own expectations.

Fair value: US$68.00

Market price vs this fair value: around 111.5% above the narrative fair value

Assumed revenue growth: 24.14% a year

• Argues that Twilio currently lacks the consistent profitability, earnings predictability and clear margin of safety that a conservative value investor might look for.
• Highlights competitive and business model risks in a fast changing sector, and questions how durable Twilio's moat is at this stage.
• Frames Twilio as better suited to growth oriented investors who are comfortable with higher uncertainty rather than those focused on traditional value criteria and long term earnings visibility.

Do you think there's more to the story for Twilio? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.