Duolingo (NASDAQ:DUOL) Presents a Compelling Case for Affordable Growth

Investors looking for growth chances often meet the difficulty of finding companies with solid expansion ability that are not already valued at high prices. The "Affordable Growth" stock screening method handles this by picking stocks that show strong growth features and keep sensible valuation measures. This system centers on companies with growth ratings over 7, valuation scores over 5, and good profitability and financial condition scores, forming a balanced method for growth investing that highlights both expansion ability and price awareness.

Growth Path

DUOLINGO INC (NASDAQ:DUOL) shows outstanding growth features that fit well with affordable growth standards. The company's revenue growth has been especially notable, with a 39.86% rise over the last year and an average yearly growth rate of 60.26% over recent years. Even more notable is the earnings per share growth of 330.60% in the past year, showing not just revenue expansion but real profit improvement. Looking ahead, experts predict continued solid performance with EPS expected to grow by 50.41% each year and revenue forecast to rise by 21.76% yearly. This lasting growth path places Duolingo well inside the screening limits that focus on companies with expansion momentum.

Valuation Check

The valuation view shows a varied but generally acceptable situation for growth-focused investors. While some standard measures seem high, the full picture shows a more detailed story:

• Price/Earnings ratio of 23.49 matches industry averages and is a bit under the S&P 500 average
• Price/Forward Earnings of 38.63 fits industry standards and looks good compared to wider market forward multiples
• The PEG ratio, which changes P/E for growth outlooks, points to possibly good value considering the company's growth path
• Price/Free Cash Flow ratio places Duolingo more reasonably than 62.82% of industry competitors

These valuation features back the screening method's focus on avoiding overpriced cases while accepting that high growth often comes with some valuation premium.

Financial Condition and Profitability

Duolingo's financial base gives more support for its affordable growth profile. The company keeps very good liquidity with current and quick ratios of 2.82, doing better than 85% of industry rivals in these areas. Importantly, the company works with no debt, removing financial leverage worries and giving operational freedom. The Altman-Z score of 10.32 shows very small bankruptcy risk and sits in the top group of the diversified consumer services industry.

Profitability measures display both strong points and parts needing work. The company reaches notable margins, including:

• Profit margin of 40.03%, doing better than 96% of industry opponents
• Gross margin of 71.99%, standing with industry front-runners
• Operating margin of 11.58%, surpassing 70% of peers

Return measures also show solid performance with Return on Assets at 20.47% and Return on Equity at 29.52%, both in the top ten percent of the industry. These profitability numbers give confidence that growth is happening efficiently.

Investment Points

The mix of Duolingo's growth path, acceptable valuation compared to growth outlooks, solid financial condition, and getting better profitability forms a strong case for adding it to affordable growth portfolios. The company's freemium model in language learning and testing platforms gives several income sources while its worldwide presence offers big expansion chances. The absence of dividend payments, while a downside for income-seeking investors, matches growth company traits as money is put back into expansion projects.

For investors wanting to look into similar affordable growth chances, more screening outcomes are available using the Affordable Growth Stock Screener. This tool allows more adjustment of growth, valuation, condition, and profitability settings to find more candidates meeting similar standards.

Disclaimer: This article gives fundamental analysis for information only and should not be taken as investment advice, a suggestion, or support of any security. Investors should do their own research and talk to financial advisors before making investment choices. Past results do not ensure future outcomes, and all investments have risk including possible loss of original money.