If you have C3.ai on your radar, you are probably weighing what to do next as the stock rides a real roller coaster. Just in the last month, C3.ai dropped 30.2%, after sliding 3.4% in the last week alone. Year-to-date, shares have plunged more than 51%. Still, if you stretch the chart out to the last three years, investors are holding onto a 16.5% gain. This shows that fortunes can turn quickly, with both risk and opportunity very much in play for those bold enough to get involved.
These sharp price moves aren’t random. The entire AI sector has been on investors’ minds, and the public’s appetite for automation seems only to grow. But not all companies are created equal. C3.ai’s price swings reflect just as much skepticism as hope about how fast and profitably it can grow.
So, is the stock undervalued after this recent drop, or is Wall Street right to be cautious? On paper, C3.ai currently scores a 2 out of 6 when it comes to classic undervaluation checks. That means the company passes two standard metrics but comes up short in four others, pointing to a mixed picture in terms of traditional value investing.
Let’s break down what those valuation checks actually mean. After that, we’ll discuss a smarter and more nuanced way to look at C3.ai’s true value that many investors are missing.
C3.ai scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
A Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and then discounting those amounts back to today’s dollars. For C3.ai, this analysis begins with current cash flows, as measured by Free Cash Flow (FCF), and forecasts how those may evolve over the next decade.
C3.ai’s latest reported Free Cash Flow is around -$82.7 million, reflecting ongoing investments and negative cash generation at present. Analyst projections indicate this figure will steadily improve and turn positive in the next few years, with FCF estimates reaching approximately $50.9 million by 2028. Extending projections beyond the analyst window, the DCF model anticipates cash flows to continue growing, reaching $277.2 million by 2035.
With these projections discounted back to their present value using the 2 Stage Free Cash Flow to Equity method, the calculation estimates an intrinsic value of $22.06 per share for C3.ai. Since the stock is trading at a 23.4% discount to this intrinsic value, the DCF analysis suggests that C3.ai is undervalued based on current expectations for future cash flow generation.
Story Continues
Result: UNDERVALUED
Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for C3.ai.
AI Discounted Cash Flow as at Aug 2025
Our Discounted Cash Flow (DCF) analysis suggests C3.ai is undervalued by 23.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
For fast-growing technology companies that are not yet consistently profitable, the Price-to-Sales (P/S) ratio is often a more insightful valuation tool than Price-to-Earnings or Price-to-Book because it focuses on revenue generation rather than profits. Growth expectations and a company’s risk profile will typically influence what is considered a “normal” or “fair” P/S ratio, with faster-growing or more stable companies generally justifying a higher multiple.
Currently, C3.ai trades at a P/S ratio of 5.98x. This is above the software industry average of 5.11x and more than double the average for its direct peers at 2.87x. At first glance, this premium may suggest that the market is either highly optimistic about C3.ai’s future growth or is overlooking some risks.
To provide a more accurate perspective, Simply Wall St uses a proprietary “Fair Ratio,” which incorporates a broader set of factors including growth prospects, profitability, industry characteristics, risk profile, and market cap. For C3.ai, the Fair P/S Ratio is estimated at 4.18x. This approach offers a more tailored benchmark that goes beyond broad averages to reflect the company’s individual circumstances and potential.
Since C3.ai’s actual P/S ratio of 5.98x is notably higher than its Fair Ratio of 4.18x, the stock currently screens as overpriced on this metric. This indicates the market may be assigning a higher value relative to its fundamentals.
Result: OVERVALUED
NYSE:AI PS Ratio as at Aug 2025
PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned there is an even better way to understand a stock’s valuation, so let’s introduce you to Narratives. A Narrative is the story behind a company; it’s your view of what makes the company grow, how its industry is changing, and what you believe are realistic numbers for future revenue, profits, and margins. Instead of just crunching formulas, Narratives connect your understanding of C3.ai’s business to a personalized forecast and an estimate of fair value.
This approach offers a dynamic and accessible tool, available on Simply Wall St’s Community page and used by millions of investors worldwide. By framing your investment with a Narrative, you’ll see how your expectations translate into numbers, so you can compare your Fair Value estimate to the actual stock price and decide if now is the time to buy or sell.
Best of all, Narratives update automatically as new information such as news, earnings releases, or industry developments becomes available, keeping your view relevant and actionable. For example, one investor might set a Narrative based on bullish analyst price targets as high as $30 for C3.ai, while another might highlight downside risk with a more conservative $13 fair value.
Do you think there’s more to the story for C3.ai? Create your own Narrative to let the Community know!
NYSE:AI Community Fair Values as at Aug 2025
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 AI.
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