• If you are wondering whether Workday is starting to look interesting on price after a rough patch, you are not alone. This article is here to help you make sense of where the valuation currently sits.
• Workday last closed at US$134.01, with returns of 3.7% over the past 7 days, a 23.7% decline over 30 days, a 34.9% decline year to date, and a 47.4% decline over the past year that has changed how many investors think about its risk and return profile.
• These moves have come as investors continue to reassess growth software names more broadly and refocus on what they are paying for each dollar of expected future cash flow and earnings. For Workday, that makes questions around valuation methods like DCF, P/S and other multiples especially important right now.
• On our simple 6 point valuation checklist, Workday scores 2 out of 6 for being undervalued, and the rest of this article will walk through what different models say about that score and hint at an even richer way to think about value that we will come back to at the end.

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

Approach 1: Workday Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes Workday’s expected future free cash flows and discounts them back to today using a required rate of return to estimate what the entire business might be worth right now.

Workday’s latest twelve month free cash flow is about $2.68b. Based on analyst inputs and Simply Wall St’s extrapolations, projected free cash flow in 2031 is $4.89b, with intermediate years between 2026 and 2035 also modeled using a 2 Stage Free Cash Flow to Equity approach.

When those projected cash flows are discounted back to today, the model provides an estimated intrinsic value of about $279.68 per share. Compared with the recent share price of $134.01, the DCF output suggests the stock trades at roughly a 52.1% discount to this estimate, indicating a substantial difference between the cash flow based valuation and the market price.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Workday is undervalued by 52.1%. Track this in your watchlist or portfolio, or discover 45 more high quality undervalued stocks.

Approach 2: Workday Price vs Earnings

For a profitable business like Workday, the P/E ratio is a useful way to link what you are paying today to the company’s current earnings. It gives you a quick sense of how many dollars investors are willing to pay for each dollar of earnings.

What counts as a “normal” or “fair” P/E depends on how the market views a company’s growth outlook and risk profile. Higher expected growth or lower perceived risk can support a higher multiple, while slower expected growth or higher risk usually points to a lower one.

Workday currently trades on a P/E of 50.86x. That is above the Software industry average of 26.44x and the peer average of 35.99x. Simply Wall St’s Fair Ratio for Workday is 36.98x, which reflects a proprietary model that looks at earnings growth, margins, size, industry and company specific risks.

Compared with simple peer or industry comparisons, the Fair Ratio aims to give a more tailored view because it adjusts for those fundamental drivers rather than treating all software names as alike. With Workday’s actual P/E of 50.86x sitting above the Fair Ratio of 36.98x, this approach currently points to the shares trading on a richer multiple than the model suggests.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Workday Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which Simply Wall St hosts on its Community page for millions of investors.

A Narrative is your story about a company in numbers, where you connect your view of Workday’s business to specific assumptions for future revenue growth, profit margins, discount rates, and an end P/E, which together produce a Fair Value you can compare with today’s price.

Because Narratives sit on the platform and update when new information such as earnings or news comes in, you can quickly see whether your story still holds up or needs adjusting. This can help you decide whether the gap between Fair Value and price still looks attractive or not for your goals.

For Workday right now, one Narrative might assume revenue growth of 15%, margins around 20%, a future P/E of 30x and reach a Fair Value of about US$253. A more optimistic Narrative assumes revenue growth of roughly 14.8%, margins near 18.7%, a future P/E of about 39.8x and a Fair Value close to US$318. This shows how different but clearly defined stories can coexist for the same stock.

Do you think there's more to the story for Workday? 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.