If you’ve been looking at the Unity Software stock chart lately and wondering if now is the right time to jump in, you’re not alone. Over the past year, Unity has made an impressive comeback, with an 89.1% increase in the past twelve months. However, short-term fluctuations have kept investors on their toes; after rising 5.8% in the past week, the stock is still down 12.8% in the past month. That’s the kind of volatility that sparks conversation, especially among those trying to understand what’s really driving the stock.
Beneath the surface, Unity’s movement has often been shaped not only by broad trends in the technology sector, but also by recent headlines about the company’s ongoing strategy shifts and partnerships. Unity, for example, continues to make waves with its push for real-time 3D content beyond gaming, generating both optimism and caution among investors weighing the company’s vision against the challenges it faces. While the news cycle hasn’t delivered any dramatic shocks, these steady developments are creating an atmosphere of anticipation around Unity’s potential.
What does that mean for the valuation? According to a series of six different valuation checks, Unity is currently undervalued in zero of them, giving it a value score of 0. That may sound daunting at first, but as any seasoned analyst will tell you, individual metrics rarely tell the whole story. In the next section we’ll break down each major approach to valuation, and at the end we’ll show you a more holistic way to assess whether Unity is a good buy right now.
Unity Software scores only 0/6 on our rating checks. See what other warning signs we found in the full valuation overview.
A Discounted Cash Flow (DCF) model estimates the intrinsic value of a company by projecting future cash flows and discounting them back to the present. This approach provides a snapshot of what the company could be worth based on its cash generation potential.
For Unity Software, the most recent free cash flow is $337 million. Analyst estimates point to steady growth in the coming years, with forecasts suggesting free cash flow could reach $889 million by 2029. These projections are based on analyst forecasts for the next five years, with subsequent years extrapolated. Estimated free cash flows continue to show healthy growth through the end of the decade, reflecting continued confidence in Unity’s operational scale.
Based on this DCF analysis, Unity’s intrinsic value is calculated at $35.41 per share. Right now, this suggests the stock is about 5.3% above its fair value, meaning the current price is slightly overvalued, but not by a wide margin.
Result: APPROXIMATELY CORRECT
To learn more about how we arrive at this fair value for Unity Software, visit the Valuation section of our business report.
U Discounted cash flow as of October 2025
Simply Wall St conducts a valuation analysis on every stock in the world every day (check out Unity Software’s valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted if it changes.
The Price-to-Sales (P/S) ratio is often seen as the preferred metric for valuing fast-growing technology companies like Unity Software. This is because companies in this sector often reinvest profits to accelerate expansion, making sales a more reliable and comparable basis for valuation than profits alone.
Growth expectations and risk profile play a crucial role in shaping what investors consider a ‘normal’ or ‘fair’ price-to-earnings ratio. Faster growing, more innovative or less risky companies can command premium multiples, while companies that face tougher competition or slower growth often see lower ratios.
Unity Software currently trades at a price-to-earnings ratio of 8.85x. This is higher than both the software industry average of 5.31x and the peer group average of 8.01x. While this could indicate an overvaluation, it’s important to look beyond simple comparisons.
This is where Simply Wall St’s “Fair Ratio” comes into the picture. Calculated based on company-specific factors such as expected growth, profit margins, industry dynamics, market capitalization and risk, the Fair Ratio provides a more fine-tuned benchmark for what Unity’s P/S multiple should reasonably be. For Unity, the Fair Ratio is estimated at 7.83x, taking into account the benefits and challenges in a complex industry.
If you compare Unity’s actual P/S ratio to its Fair Ratio, the difference is just over 1x. This indicates that the stock is trading at a moderate premium to fundamentals, but not dramatically mispriced.
Result: EXCESS VALUE
NYSE:U PS ratio as of October 2025
PS ratios tell one story, but what if the real opportunities lie elsewhere? Discover companies where insiders are betting on explosive growth.
We’ve said before that there’s an even better way to understand appreciation, so let’s introduce you to Narratives. A Narrative is a structured story about a company. It combines your vision of where the company is going with your assumptions about future revenue, margins and risks, and then translates that story into a financial forecast and an estimated fair value.
Unlike static models, Narratives allow you to explain the “why” behind your rating. They help you connect your company’s strengths, strategy changes and sector changes to what you think the stock is really worth. This approach is simple and interactive and is available to millions of investors on the Simply Wall St Community page, where you can see and compare stories side by side.
With Narratives, you can quickly see if your story suggests Unity is overvalued or undervalued by comparing its Fair Value to its current price. Because stories dynamically update as new news or business results emerge, your insights remain relevant and actionable.
For example, one investor focused on Unity’s leading position in 3D content and diversified revenues might estimate a fair value of $38.48, while another investor who is more cautious about execution risk and growth might predict $18.00. These are two different stories, each providing a different path to a price target and decision.
For Unity Software, we make it very easy for you with previews of two leading Unity Software Narratives:
🐂 Unity Software Bull Case
Fair value: $38.48
Undervalued by: -3.1%
Sales growth rate: 15%
Unity maintains a strong position in 2D/3D content development and is expanding its reach into non-gaming sectors, reducing risk and supporting long-term growth.
Recent restructurings under new management have addressed past operational missteps, including reversing controversial policies and improving financial stability.
Synergies between Unity’s Create and Grow solutions provide competitive advantages. However, competition in the advertising and gaming markets remains a notable challenge.
🐻 Unity Software bear case
Fair value: $36.87
Overvalued by: 1.1%
Sales growth rate: 9.5%
Rapid innovation in AI-driven products and a growing subscription business are driving revenue and margins. However, aggressive investments increase the risks to sustainable profitability.
Diversification through partnerships and new industry adoption supports Unity’s market position. Still, competition from larger established players and regulatory pressure could impact growth.
Analysts’ consensus price target is slightly below the current share price, suggesting the stock is considered fairly valued. Risks remain around execution and profitability timelines.
Do you think there is more to the story for Unity Software? Create your own story to let the community know!
NYSE:U Community Fair Values as of October 2025
This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.
Companies discussed in this article include U.
Do you have feedback on this article? Worried about the content? Please contact us directly. You can also send an email to [email protected]
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