Duolingo (DUOL) isn’t a well known name, but it’s the dominant player in a good-sized field: the company has the highest grossing education app across app stores and is the most popular way for people to learn languages, notes Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.

Duolingo says that seven times as many people Google “duolingo” compared to “learn Spanish.” The firm’s platform offers learning for 40 different languages, though these aren’t usually hard-core courses; they instead are presented almost as games to make learning more fun, which keeps people coming back.

On the more serious side of things, the company also has an English test that’s used for international admissions by more than 3,600 higher education outfits.

All told, it’s a big market, much bigger than you might think: Duolingo has 49.2 monthly million active users and 12.5 million daily active users (it says there are more people learning many languages on its platform than those that natively speak them!), though the vast majority use the product for free (with ads providing some revenue).

At the end of Q1, the company has 2.9 million paying subscribers (up 60% from a year ago; no ads and more features), which account for most of the revenue (about three quarters of the total). Still, all business lines are growing — subscription revenue was up 45% in Q1, while ads (up 27%) and English tests (up 60%) are also expanding, and while earnings are in the red, free cash flow is positive thanks to the subscription (deferred revenue) aspect of the business.

Big picture, Duolingo is becoming the standard for anyone to learn a new language, so there should be plenty of growth potential, first from converting current free users to paying ones, second by attracting new users, and third via the English test (management thinks we’re in the early stages of standardized assessments moving online).

DUOL came public last July, and after a brief pop, had a big decline, partly due to the typical post-IPO droop and partly because of the market. But the stock started to put up a fight in March, when it found big-volume support, and it did so again in May, which has led to some positive performance in recent weeks.

A downgrade and the weak market took a chunk out of DUOL, so we’ll set our buy range up a bit at the $106 to $108 level, thinking a rebound from today would be bullish. Analysts see the top line lifting more than 40% this year and nearly 30% next, both of which are likely low. It’s a good story.

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