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If you’re wondering whether Unity Software, valued at around $40.95, still offers value after its recent run, this article will focus entirely on what the current price might imply.
The stock has seen a decline of 7.5% so far this year, with a decline of 6.5% over the past 30 days, although the one-year return is 88.1% and the three-year return is 30.8%, while the five-year return reflects a decline of 73.4%.
Recent news surrounding Unity has largely focused on its role in creating real-time 3D content and its position in gaming and non-gaming applications. Many investors keep a close eye on these areas as a gauge of future demand for the platform, and these themes often determine how investors react to price movements, even when the daily headlines are relatively quiet.
Unity currently has a Valuation Score of 2 out of 6. We’ll break this down using some common methods and end with a more holistic way to think about the stock’s valuation.
Unity Software scores only 2/6 on our valuation checks. See what other warning signs we found in the full valuation overview.
A Discounted Cash Flow or DCF model takes estimated future cash flows and reduces them to what they could be worth today. Essentially the question is: What are all of Unity Software’s future cash flows worth in today’s dollars?
For Unity, the model uses a 2-phase approach from free cash flow to equity. The latest twelve-month free cash flow is about $373.4 million, and analysts have made explicit predictions out to 2030, with Simply Wall St extrapolating beyond the first five years. By 2030, free cash flow is projected at $1.348 billion, with interim annual estimates such as $489.1 million in 2026 and $917.1 million in 2028 at the core of the projection trajectory.
Based on this, the DCF model arrives at an estimated intrinsic value of approximately $56.65 per share. Compared to the current share price of around $40.95, this implies that Unity Software is trading at a discount of around 27.7%, suggesting that the stock screens are undervalued in this way alone.
Result: UNDERVALUE
Our Discounted Cash Flow (DCF) analysis shows that Unity Software is 27.7% undervalued. Follow this in your watchlist or portfolio, or discover 863 more undervalued stocks based on cash flows.
You discounted cash flow as of January 2026
To learn more about how we arrive at this fair value for Unity Software, visit the Valuation section of our business report.
For companies where earnings aren’t a reliable guide, the P/S ratio is often more useful because it compares what you pay for each dollar of sales, rather than for each dollar of profit. This allows you to assess how the market values the company’s current revenue base, regardless of where margins currently stand.
Growth expectations and risk still matter here, as faster expected revenue growth or lower perceived risk can justify a higher P/S ratio, while slower growth or higher uncertainty typically indicates a lower, more conservative multiple.
Unity currently trades at a price-to-earnings ratio of approximately 9.72x. That’s above the broader software industry average of 4.67x and also above the peer group average of 8.89x. Simply Wall St’s Fair Ratio for Unity is 8.69x, which is its own estimate of what a “normal” P/S might be when you take into account earnings growth prospects, industry, profit margin profile, market cap, and company-specific risks.
Compared to simple peer or sector comparisons, the Fair Ratio aims to be more tailored as it adapts to Unity’s own characteristics, rather than assuming it should act in line with a broad group.
On this basis, Unity’s current price-to-earnings ratio of 9.72x is above its Fair Ratio of 8.69x. This indicates that the stock screening in this approach is overvalued.
Result: EXCESS VALUE
NYSE:UP/S ratio as of January 2026
P/S ratios tell one story, but what if the real opportunities lie elsewhere? Discover 1,445 companies where insiders are betting on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation. Let’s introduce you to Narratives, an easy way to write the story behind your numbers by connecting your view of Unity’s products, competition, and risks to a financial forecast and fair value. All this happens on the Simply Wall St Community page, where millions of investors share their work. You can then compare that fair value to the current price so you can decide whether to buy or sell. Each story is automatically updated as new news or earnings come in. For example, one Unity Narrative might assume a fair value of approximately US$38.48 with revenue growth of 15.0%, a profit margin of 12.67%, and a forward price-to-earnings ratio of 55.53x. Another might see fair value closer to $45.63, with 13.16% revenue growth, 0.98% profit margin, and a very large forward price-to-earnings ratio. This shows how different but clearly explained points of view can coexist.
For Unity Software, here are examples of two leading Unity Software stories to help you compare different points of view:
🐂 Unity Software Bull Case
Fair value: US$45.63
Implied price gap versus last close: approximately 10.3% below this narrative fair value
Assuming turnover growth: 13.16%
Analysts in this story peg Unity Software’s fair value at expected revenue of about $2.3 billion and profit of $313.8 million around 2028, assuming margins shift from a loss today to a profit margin of 13.5%, in line with the broader U.S. software industry.
To support that outcome, the story focuses on the expansion of AI-driven products like Unity Vector and Unity 6, the growth of subscription-based Create revenues, and broader use of real-time 3D across the gaming and non-gaming sectors.
The story also points to risks around high spending on AI and new products, execution in non-gaming markets, competition from other search engines, data privacy regulations and dependence on large customers. These are then combined into a fair value estimate, using a discount rate of 8.77% and a very high forward P/E assumption.
🐻 Unity Software bear case
Fair value: US$38.48
Implied price gap versus last close: approximately 6.4% above this narrative fair value
Assuming turnover growth: 15.0%
This story sees Unity Software as a major player in 2D and 3D content creation for mobile, indie games and XR, with revenues also coming from non-gaming sectors, but that comes with caution about how much of that potential is already reflected in the share price.
The author highlights progress on restructuring and management changes, including the rollback of the runtime fee, as well as the link between Unity’s Create and Grow solutions, while also noting competition in advertising and gaming.
Even with references to a solid liquidity position and positive cash flow, the fair value of US$38.48 suggests that, based on the assumptions, Unity Software’s long-term prospects and execution risks could justify a lower valuation than the current price.
Whichever story best fits your own expectations for Unity Software, you can use these stories as a starting point, adjust the growth, margin and risk assumptions and see how your fair value compares to where the stock is trading today.
Curious how numbers become stories that shape markets? Discover community stories
Do you think there is more to the story for Unity Software? Check out our community to see what others are saying!
NYSE:U 1-year stock price chart
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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