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Zscaler stock has fallen 48.0% over the past year, yet the company still screens as attractively priced on several valuation checks, and a Discounted Cash Flow (DCF) estimate currently points to meaningful upside versus the market price. For investors weighing that gap, the issue is whether recent news driven strength in cybersecurity demand and renewed interest in Zscaler is enough to justify the implied intrinsic value.
Zscaler shares are down 48.0% over the past year, which puts the recent rally in the context of a longer period of weak returns for shareholders.
Heightened focus on cyber threats and zero trust security can support growth expectations for Zscaler. However, rising AI related infrastructure costs highlighted in recent coverage may limit how much of that growth converts into future free cash flow.
Zscaler scores highly on valuation checks, with 5 out of 6 screens suggesting the stock looks cheap, while the Discounted Cash Flow (DCF) model indicates the shares trade at roughly a 32.8% discount to intrinsic value.
The stock’s next move may depend on whether Zscaler can translate strong interest in its zero trust platform into cash flows that close the gap between market price and the current intrinsic value estimate.
Find out why Zscaler’s -48.0% return over the last year is lagging behind its peers.
Does Zscaler Look Undervalued on Cash Flow?
The Discounted Cash Flow (DCF) model values Zscaler by projecting its future cash flows and discounting them back to today. On this view, Zscaler is treated as a growing cash generator, with latest twelve month free cash flow of about $852.3 million and an outlook that assumes cash flows continue to grow rather than contract. Based on these projections, the 2 Stage Free Cash Flow to Equity model arrives at an estimated intrinsic value of about $223 per share.
That compares to a current market price that sits roughly 32.8% below this estimate, which suggests Zscaler screens as undervalued on this DCF framework. The recent surge in Zscaler shares after international cyber threat alerts helps explain renewed interest in the stock, but the model indicates the market price still trails the cash flow based intrinsic value estimate.
Overall, the DCF workup suggests Zscaler stock currently looks undervalued relative to its projected cash generation.
Our Discounted Cash Flow (DCF) analysis suggests Zscaler is undervalued by 32.8%. Track this in your watchlist or portfolio, or discover 48 more high quality undervalued stocks.
Story Continues
ZS Discounted Cash Flow as at Jul 2026
Does Zscaler Look Fairly Valued on Sales?
P/S is often a useful cross check for software companies like Zscaler, where investors pay close attention to revenue scale and growth alongside earnings and cash flow.
Zscaler currently trades on a P/S of 7.6x, which is higher than the broader software industry average of 3.5x but below a peer group average of 9.7x. A more tailored fair P/S ratio of 8.3x, which factors in the company’s size, margins and risk profile, sits slightly above the current multiple, indicating only a modest gap between price and this benchmark.
That combination suggests the market is assigning Zscaler a premium to the typical software stock, but not a premium that is out of line with similar cybersecurity peers or the company’s fundamentals as captured in the fair ratio.
On the P/S multiple, Zscaler stock appears priced roughly in line with what the fair ratio would indicate.
NasdaqGS:ZS P/S Ratio as at Jul 2026
See what the numbers say about this price — find out in our valuation breakdown.
The Zscaler Narrative: What Would Justify Today’s Price?
Simply Wall St Narratives for Zscaler pick up where the valuation checks leave off by spelling out which future paths for Zscaler’s growth, margins and earnings would need to play out for the stock to be worth meaningfully more or less than it is today on the market. Each Narrative sets out a fair value as a thesis about the business that you can come back to and compare with how Zscaler’s actual progress unfolds over time, and they sit on the company’s Community page.
One of the top community narratives on Zscaler: 22% undervalued
“The transition away from legacy security appliances (firewalls, SD-WAN) in favor of unified cloud-delivered security architectures is gaining momentum across key verticals like retail and manufacturing…”
Read one of the top narratives on Zscaler
Do you think there’s more to the story for Zscaler? Head over to our Community to see what others are saying!
The Bottom Line
For Zscaler, the Discounted Cash Flow (DCF) work suggests meaningful intrinsic value upside, while the P/S view points to a stock that is now priced roughly in line with a tailored fair ratio. Together with strong results on broader valuation checks, the setup looks less like a clear bargain and more like a situation where the market is weighing execution risk against that implied discount. What matters most from here is whether Zscaler can turn strong interest in zero trust security into sustained, cash rich growth that justifies the intrinsic value estimate rather than the current market multiple.
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.
Companies discussed in this article include ZS.
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