If you have Elastic stock on your watchlist or in your portfolio, you are probably wondering if the recent dip is a chance to buy, a reason to worry, or just another chapter in this company’s wild ride. Over the past month, Elastic shares have slipped by 10.6%, with a 6.9% drop just in the last week. For the year so far, the stock sits down 17.7%, painting a picture that’s anything but steady. Yet, dig a little deeper, and you’ll see there is more nuance to the story.
Part of the pressure has stemmed from competitive developments in artificial intelligence. Notably, BofA recently cut their price target for Elastic, citing tougher competition for AI workloads, which could crimp growth. On top of that, broader market worries, like news of large-scale cuts to clean energy funding and delays in offshore wind projects, have helped stoke investor caution, even if they’re not directly tied to Elastic’s bottom line. Despite this rollercoaster, Elastic’s longer-term record remains surprising: shares are almost flat over one year, up nearly 30% over three years, though still off from their five-year highs.
So, should you view this pullback as a window of opportunity? Our analysis suggests the answer leans bullish when it comes to value. According to our valuation scorecard, Elastic is undervalued on 5 out of 6 tested metrics, earning a robust valuation score of 5. But does checking almost every traditional box really mean the stock is a bargain? Let’s unpack these different valuation methods, and then we will talk about an even better way to judge whether Elastic is genuinely undervalued right now.
Why Elastic is lagging behind its peers
The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s dollars. This provides investors with an idea of what a stock is truly worth, based on its expected cash generation rather than market fluctuations.
For Elastic, the most recent reported Free Cash Flow stands at $314 million. Analysts provide estimates for Free Cash Flow over the next five years, foreseeing steady growth. By 2030, these projections expect Elastic to generate around $748 million in Free Cash Flow. Estimates for later years are extrapolated using industry growth assumptions and reach over $1 billion in annual cash flows by 2035.
Taking all of these projections into account, the DCF model calculates an intrinsic value of $138.27 per share. This is approximately 41% higher than the current stock price, which suggests Elastic is significantly undervalued according to this approach.
Story Continues
Result: UNDERVALUED
ESTC Discounted Cash Flow as at Oct 2025
Our Discounted Cash Flow (DCF) analysis suggests Elastic is undervalued by 41.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The Price-to-Sales (P/S) multiple is often favored for growing technology companies like Elastic that are not yet consistently profitable. Rather than focusing on earnings, the P/S ratio helps investors compare a company’s valuation to its revenue, making it especially useful in industries where rapid growth or reinvestment is prioritized over bottom-line profits. High-growth companies tend to command higher P/S multiples, as investors are willing to pay more for future potential. In contrast, riskier or slower-growth firms trade at lower ratios.
Currently, Elastic trades at a P/S multiple of 5.6x. This is slightly above the average for its Software industry peers (5.3x), and just below the peer group average of 6.8x. However, a more nuanced yardstick is Simply Wall St’s Fair Ratio, which sits at 7.0x for Elastic. This Fair Ratio is calculated using both quantitative and qualitative factors specific to the company, including growth prospects, profit margins, risk factors, market cap, and industry conditions, rather than a simple average that might ignore unique strengths or weaknesses.
Comparing Elastic’s current P/S multiple of 5.6x to its Fair Ratio of 7.0x suggests the stock is undervalued relative to where it should be, considering all its fundamental drivers and risks.
Result: UNDERVALUED
NYSE:ESTC PS Ratio as at Oct 2025
PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier, we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your personal story or perspective about a company; it is how you connect key drivers and business changes to your own estimates for revenue, earnings, and margins, and then translate these into a fair value for the stock. Instead of relying solely on static models or consensus forecasts, Narratives allow you to bridge what is happening within a company and its market directly to financial forecasts, making your investment thesis clear and actionable.
With Simply Wall St’s Narratives feature, available to millions of investors in the Community page, anyone can create or explore different perspectives on a company like Elastic. Each Narrative ties together a story, such as the impact of AI, cloud migration, or competition, with specific fair value assumptions, all updated automatically as news, earnings, or market shifts occur.
For instance, some investors are optimistic, seeing AI adoption and digital transformation as major tailwinds, resulting in bullish fair values up to $143.0. Others focus on intense competition and possible market share loss, with more cautious targets as low as $92.0. Narratives let you weigh these outlooks against the current share price, helping you decide when to buy, hold, or sell, always anchored to the evolving story behind the numbers.
Do you think there’s more to the story for Elastic? Create your own Narrative to let the Community know!
NYSE:ESTC Community Fair Values as at Oct 2025
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.
Companies discussed in this article include ESTC.
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