Coursera

On the surface, Coursera Inc appears cheap due to significant downward price pressure over the past year. To incorporate the risk associated with a potential value trap, we have capped its rating at 3 stars. The stock currently trades at a 46% discount to our quantitative fair value estimate of $9.41 per share; however, caution is warranted due to this estimate's high uncertainty rating.

The firm's valuation metrics increase our fair value estimate. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. For example, the firm's enterprise value to EBITDA ratio of 4.2 sits in the bottom 10% compared with peers globally. Relative to the company's EBITDA, the enterprise value of the business is low, which contributes to our view that shares are undervalued.

The firm's profitability is an additional encouraging factor. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. The firm's sales yield of 96.1%, a core component of profitability, lies in the top 40% globally. This company has a robust ability to generate sales without much capital investment, freeing up more capital to be returned to shareholders in the long run. This characteristic further promotes our favorable price/fair value ratio.

The company's quantitative economic moat rating of none suggests any excess returns could erode quickly as competition arrives. However, its financial health score is strong, suggesting that the company should be well positioned to weather tough times.