Duolingo normalized p/e at 90 is 28x! Normalized p/e at 340 was 105x!
u/NoGarlic2387 ·
Reddit — r/ValueInvesting
· February 26, 2026 at 22:47
· ⬆ 18 pts
· 💬 42 comments
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AI Summary
Summary
The post analyzes Duolingo's (DUOL) Price-to-Earnings (P/E) ratio after adjusting for a one-time, non-recurring tax benefit of $222.7 million.
The author's thesis is that Duolingo's stock, which appears expensive based on reported GAAP earnings, is actually much cheaper on a "normalized" basis, especially after its recent price drop.
Quality assessment: This is a focused analytical insight, not comprehensive Due Diligence (DD). The author correctly identifies a significant one-time item distorting the P/E ratio, providing a more realistic valuation metric. However, it's a single-point analysis, not a full investment thesis.
Duolingo's reported earnings are artificially inflated by a one-time $222.7 million deferred tax asset valuation allowance release, making its standard P/E ratio misleadingly low. By normalizing earnings (removing the one-time benefit), the author calculates a "true" P/E of ~28x at a price of $90. This suggests the stock is significantly cheaper than it appeared at its peak and is now at a more reasonable valuation for a growth company. The post-earnings crash has brought Duolingo's valuation to an attractive level (28x normalized P/E), implying a buying opportunity for a value-oriented investor. The market may continue to punish the stock for other reasons (e.g., slowing growth, competitive pressure, poor guidance) regardless of the normalized valuation. The author's normalization method might be too simplistic.
This Reddit post, published February 26, 2026,
features u/NoGarlic2387
discussing DUOL.
1 trade idea extracted by AI with direction and confidence scoring.