Revisiting Youdao (NYSE:DAO): Is the EdTech Stock’s Recent Momentum Backed by Its Valuation?

Youdao (NYSE:DAO) has quietly delivered a strong year, with the stock up roughly 29% year to date and earnings accelerating, making it an interesting education tech name for investors to revisit.

See our latest analysis for Youdao.

The latest 7 day share price return of 9.0 percent, taking Youdao to around 9.19 dollars, adds to a solid year to date climb and builds on an impressive 3 year total shareholder return of roughly 82 percent, suggesting momentum is gradually rebuilding despite earlier volatility.

If Youdao has piqued your interest and you want to see what else is gaining traction in digital learning and automation, now is a good time to explore high growth tech and AI stocks.

With earnings inflecting, revenue still growing double digits, and the stock trading at a sizable discount to analyst targets, the key question now is whether Youdao is genuinely undervalued or if the market is already pricing in its next leg of growth.

Most Popular Narrative Narrative: 29.5% Undervalued

With Youdao last closing at 9.19 dollars against a narrative fair value near 13 dollars, the spread points to meaningful upside if projections land.

Rapid advancement and integration of proprietary large language models like Confucius are enabling Youdao to deploy personalized and adaptive learning tools (e.g., AI Essay Grading, Mr. P AI Tutor, and AI-driven course recommendations). These tools are driving record high user retention and positioning the company to capture structural growth in digital, lifelong, and AI powered education supporting future revenue growth and margin expansion.

Read the complete narrative.

Curious how steady double digit revenue growth, rising margins, and a premium future earnings multiple all combine to justify this upside case? The narrative reveals the full financial blueprint behind that bullish fair value.

Result: Fair Value of $13.04 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sustained margin pressure in online marketing and continued weakness in smart devices could derail profitability gains and challenge the bullish growth narrative.

Find out about the key risks to this Youdao narrative.

Another Angle on Valuation

On earnings multiples, Youdao looks far less forgiving. Its price to earnings ratio of 54.2 times sits well above the US Consumer Services average of 16.6 times and even above a fair ratio of 37.2 times, implying meaningful downside risk if sentiment or growth expectations cool.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Youdao Narrative

If you would rather dig into the numbers yourself and challenge these viewpoints, you can build a customized story for Youdao in minutes, Do it your way.

A great starting point for your Youdao research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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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.

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