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Verdict
Quantitative factor alignment verified for current market regime.
Quant Score
Rank
#3505
Positioning
Market Dominance
Services
Computer Software
$16.9B
John S. Riccitiello
Unity Software Inc. creates and operates an interactive real-time 3D content platform. Its platform provides software solutions to create, run, and monetize interactive, real time 2D and 3D. The company was founded in 2004 and is headquartered in San Francisco, California.
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X-AXIS: EV/EBITDA (LOWER = CHEAPER) | Y-AXIS: ROE (HIGHER = ELITE) | RED CIRCLE = U ANALYSIS TARGET
| Stock | Rating | Score▼ | Quality | Value | Momentum | P/E | EV/EBITDA | ROE | ROA | Gross Mgn | Op Mgn | Net Mgn | Rev Growth | Div Yield | D/E | Mkt Cap | AUDIT |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$YALA Yalla Group Ltd | 75 | 89 | 99 | 80 | - | - | - | - | - | - | - | - | - | - | $0 | VS | |
$GRVY GRAVITY Co., Ltd. | 75 | 82 | 96 | 71 | - | - | - | - | - | - | - | - | - | - | $0 | VS | |
$ISSC INNOVATIVE SOLUTIONS & SUPPORT INC | 73 | 81 | 88 | 94 | 25.0x | 14.1x | 17.1% | 10.3% | 35.5% | 14.6% | 10.1% | 105.2% | 0.0% | 41.0x | $244M | VS | |
$AER AerCap Holdings N.V. | 72 | 60 | 87 | 84 | - | - | - | - | - | - | - | - | - | - | $0 | VS | |
$HCSG HEALTHCARE SERVICES GROUP INC | 72 | 74 | 88 | 88 | 7.1x | 6.1x | 28.9% | 20.8% | 20.8% | 9.9% | 9.3% | 8.5% | 0.0% | 1.0x | $1.2B | VS | |
$LQDT LIQUIDITY SERVICES INC | 72 | 90 | 88 | 68 | 24.9x | 14.3x | 14.1% | 8.3% | 45.7% | 8.5% | 6.2% | 28.1% | 0.0% | 0.0x | $736M | VS | |
$TRTNpA Triton International Ltd | 71 | 70 | 89 | 70 | - | 1.7x | 0.0% | - | 97.4% | 58.0% | 37.4% | - | 8.8% | 264.0x | $2.5B | VS | |
$EDU New Oriental Education & Technology Group Inc. | 71 | 83 | 52 | 77 | - | - | - | - | - | - | - | - | - | - | $0 | VS | |
$NTES NetEase, Inc. | 71 | 88 | 93 | 68 | - | - | - | - | - | - | - | - | - | - | $0 | VS | |
$UTI UNIVERSAL TECHNICAL INSTITUTE INC | 70 | 86 | 86 | 72 | 43.2x | 16.0x | 15.3% | 5.8% | 100.0% | 6.9% | 5.2% | 15.1% | 0.0% | 24.0x | $1.8B | VS | |
$U Unity Software Inc. | 40 | 32 | 43 | 50 | - | 172.7x | -13.5% | -6.4% | 74.3% | -27.9% | -24.3% | 4.8% | 0.0% | 103.0x | $16.9B | ||
| SECTOR BENCH | - | - | - | - | - | 23.7x | 11.7x | 5.7% | 2.4% | 64.6% | 4.5% | 2.8% | 8.6% | 0.0% | 0.3x | - | REF |
Unity Software Inc. (U) receives a "Reduce" rating with a composite score of 40.3/100. It ranks #3505 out of 7,333 stocks in our coverage universe and carries a 2-star rating. Ratings are driven by a 6-factor quantitative model measuring quality, value, momentum, investment, stability, and short interest.
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In-line with peers — no strong momentum signal
Fair valuation relative to peers
Weak fundamentals — higher risk of value trap
High volatility — wider range of outcomes increases timing risk
Aggressive spending — empire-building risk, dilutive growth
Mid-range overall rating
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Relative valuation derived from Services sector benchmarks. Model weights: EV/EBITDA (40%), P/B (35%), P/S (25%). Re-calculated daily.
No analyst ratings for U.
View All Ratings| Factor | Global | Sector | Tilt |
|---|---|---|---|
| PROFITABILITY | 32 | 20 | +12ALPHA |
| MOMENTUM | 50 | 50 | 0NEUTRAL |
| VALUATION | 43 | 41 | +2NEUTRAL |
| INVESTMENT | 30 | 31 | -1NEUTRAL |
| STABILITY | 23 | 13 | +10ALPHA |
| SHORT INT | 76 | 89 | -13DRAG |
Global = full universe. Sector = relative to industry peers. Positive tilt indicates idiosyncratic strength.
ROIC -112.7% vs WACC 7.6% (spread -120.4%)
GM 74% vs sector 65%, OM -28% vs sector 5%
Capital turnover 5.51x, R&D intensity 50.3%
Rev growth 5%, 6yr history
Interest coverage -79.3x
Composite assessment of profitability, capital efficiency, and financial strength. Top-tier entities demonstrate sustainable cash flow generation and elite competitive moats.
Profit generated per dollar of shareholder equity
Efficiency of asset utilization
Pricing power and cost efficiency
Core business profitability
Bottom-line profitability
The Quality factor evaluates the persistence and magnitude of realized cash flows. Companies with scores >70 exhibit superior pricing power and structural financial resilience through diverse economic regimes.
Our uncertainty rating tracks the predictability of future cash flows and potential for permanent capital loss. Moderate visibility with standard industry cyclicality.
We rate Unity Software Inc. (U) as a Reduce with a composite score of 40.3/100 at a current price of $18.29. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential.
Unity Software Inc. holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 40.3/100 places it at rank #3505 in our full universe.
No Moat
Very High
Poor
Fair Value
Gross margins of 74% signal strong pricing power.
Stable competitive position in a defensive sector.
Leverage of 103% D/E amplifies downside risk.
Below-average quality raises earnings sustainability concerns.
Vulnerability to macroeconomic shocks and interest rate volatility.
Unity Software Inc. represents a reduce based on multi-factor quantitative performance.
Unity Software Inc. receives a Reduce rating from our analysis, with a composite score of 40.3/100 and 2 out of 5 stars, ranking #3505 out of 7,333 stocks. U's factor profile shows weakness across multiple dimensions, suggesting the stock may underperform going forward. Existing holders may want to consider trimming positions or tightening stop-losses.
U's quality score of 32/100 is below average, suggesting challenges with profitability or capital efficiency. The company reports a return on equity of -13.5% (sector avg: 5.7%), gross margins of 74.3% (sector avg: 64.6%), net margins of -24.3% (sector avg: 2.8%). Investors should examine whether management is actively addressing these weaknesses or if they reflect structural industry headwinds.
With a value score of 43/100, U appears somewhat expensive relative to its fundamentals. Key valuation metrics include an EV/EBITDA of 172.73x, a P/B ratio of 2.44x. Investors paying a premium here are likely betting on above-average growth or margin expansion to justify current prices.
Unity Software Inc.'s investment score of 30/100 suggests limited reinvestment activity. Key growth metrics include revenue growth of 4.8% vs. a sector average of 8.6% and a return on assets of -6.4% (sector: 2.4%). While this can be positive for mature, cash-generative businesses returning capital to shareholders, it may also signal a lack of growth opportunities or management conservatism.
U demonstrates moderate momentum with a score of 50/100, suggesting a neutral price trend without strong directional conviction. Revenue growth stands at 4.8% year-over-year, while a beta of 2.08 reflects its sensitivity to broader market moves. Moderate momentum may indicate the stock is consolidating or transitioning between trends, warranting close monitoring of upcoming catalysts.
Unity Software Inc. registers a low stability score of 23/100, indicating high volatility and potentially stressed financial conditions. Key stability metrics include a beta of 2.08 and a debt-to-equity ratio of 103.00x (sector avg: 0.3x). Stocks at this level carry elevated capital loss risk and may be unsuitable for conservative portfolios without careful risk management.
U carries a short interest score of 76/100, indicating moderate short selling activity. This is a neutral reading — not enough to signal systemic bearishness, but worth monitoring. Specific risk factors include high market sensitivity (beta: 2.08), elevated leverage (D/E: 103.00x). At $16.9B market cap (large-cap), Unity Software Inc. offers reasonable institutional liquidity.
Unity Software Inc. is a large-cap company in the Services sector, ranked #0 of 50 in its sector (100th percentile) and #3505 of 7,333 overall (52nd percentile). Key comparisons include ROE of -13.5% trailing the 5.7% sector median and operating margins of -27.9% below the 4.5% sector average. This top-quartile standing reflects exceptional competitive strength relative to Services peers.
While U currently exhibits a REDUCE profile, superior opportunities exist within the SERVICES sector. Our model identifies several "Strong Buy" candidates with higher quality scores and more attractive valuations among direct industry competitors.
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Improvement in Stability (23) would have the largest impact on the composite score.
EV/EBITDA 1373% ABOVE SECTOR MEDIAN
ROE 334% BELOW SECTOR MEDIAN
Gross Margin 15% ABOVE SECTOR MEDIAN (FAVORABLE)
Above 50MA
37.18%
Net New Highs
+51081
Software stocks declined sharply with the iShares Tech-Expanded Software Sector ETF (IGV) falling over 3%, while major U.S. indexes posted modest gains. The January jobs report showed strong headline numbers but disappointing revisions, with 2025 job growth at its weakest since 2003. Bitcoin dropped over 3% to $66,000, and notable losers included Unity Software, Mattel, and Zillow, while semiconductors and energy stocks outperformed.
Ten large-cap stocks experienced significant declines during the week of January 26-30, 2026. Unity Software fell 31.63% following CEO comments about world models amid competition from Google's Project Genie. Precious metals stocks including Hecla Mining (down 33.33%) and Coeur Mining (down 26.13%) declined after President Trump's nomination of Kevin Warsh for Fed Chair strengthened the dollar. Healthcare stocks UnitedHealth (down 17.87%) and Humana (down 26.07%) fell after analyst downgrades. Other notable losers included The Trade Desk (down 16.61%), First Majestic Silver (down 22.86%), Axon Enterprise (down 20.88%), Reddit (down 16.79%), and Regencell Bioscience (down 13.38%).
Unity stock has tumbled following Google's Project Genie AI reveal and disappointing earnings, but CEO Matthew Bromberg argues that AI world generators are complementary to game engines, not replacements. While Project Genie is impressive, it has significant limitations and cannot efficiently replace real-time 3D execution platforms like Unity. The company is positioning AI as an accelerator for game development through new tools like Unity Studio, which aims to democratize game creation.
The software sector is experiencing one of its worst drawdowns in years, with the iShares Expanded Tech-Software Sector ETF (IGV) down 16% over seven consecutive sessions. Year-to-date, 100 of 110 constituents are in negative territory, with over 20 stocks down more than 30%. The selloff is attributed to AI disruption pressuring software business models, though some industry leaders like Nvidia's CEO argue AI depends on software tools rather than replacing them.
Google's Project Genie AI game design tool sparked a market sell-off in gaming stocks, raising concerns about disruption to game engines and platforms. However, analysts argue the technology is still limited and may actually benefit established platforms with distribution control and quality gatekeeping. Meanwhile, PayPal's CEO departure signals board dissatisfaction, though the stock's valuation at 8.5x earnings presents a potential value opportunity.