Okta Inc (OKTA, Financial) has seen a daily loss of 8.03% and a three-month gain of 8.33%. The company also reported a Loss Per Share of 3.69. Despite these figures, the question remains: Is Okta's stock significantly undervalued? This article delves into the valuation analysis of Okta (OKTA), providing a comprehensive understanding of the company's intrinsic value. Read on to explore our detailed assessment.
A Snapshot of Okta Inc (OKTA, Financial)
Okta is a cloud-native security company based in San Francisco, specializing in identity and access management. Since its public debut in 2017, Okta has been catering to two key client groups: workforces and customers. Okta's workforce solutions allow employees to securely access cloud-based and on-premises resources. Similarly, the company's customer solutions enable clients' customers to securely access the client's applications.
As of October 23, 2023, Okta (OKTA, Financial) is trading at $69.5 per share, with a market cap of $11.40 billion. Interestingly, the GF Value, an estimate of the stock's fair value, stands at $255.4. This discrepancy prompts a deeper analysis of Okta's true worth.
Understanding the GF Value
The GF Value is a proprietary measure that represents the intrinsic value of a stock. It is calculated based on three key factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) at which the stock has traded.
- GuruFocus adjustment factor, which is based on the company's past returns and growth.
- Future estimates of the business performance.
The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to the GuruFocus Value calculation, Okta (OKTA, Financial) is significantly undervalued. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. Okta's cash-to-debt ratio is 1.34, ranking it worse than 60.94% of 2734 companies in the Software industry. Based on this, GuruFocus ranks Okta's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Okta has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $2.10 billion and Loss Per Share of $3.69. Its operating margin is -30.66%, which ranks worse than 78.93% of 2762 companies in the Software industry. Overall, the profitability of Okta is ranked 4 out of 10, indicating poor profitability.
Growth is one of the most important factors in the valuation of a company. Okta's 3-year average revenue growth rate is better than 86.01% of 2395 companies in the Software industry. However, Okta's 3-year average EBITDA growth rate is -44.7%, which ranks worse than 91.91% of 1990 companies in the Software industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is another way to evaluate its profitability. Over the past 12 months, Okta's ROIC was -8.93, while its WACC came in at 8.68.
Conclusion
In conclusion, the stock of Okta (OKTA, Financial) is estimated to be significantly undervalued. The company's financial condition is fair, and its profitability is poor. Its growth ranks worse than 91.91% of 1990 companies in the Software industry. To learn more about Okta stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
