Okta Inc (OKTA, Financial) experienced a daily gain of 4.7%, yet over the past three months, its stock has seen a decline of 12.1%. With a reported Loss Per Share of $2.86, investors may be questioning whether the stock is significantly undervalued. This article aims to delve into the valuation analysis of Okta, providing insights into whether its current market price reflects its true value. Read on to discover the factors that contribute to Okta's valuation.
Company Introduction
Okta Inc (OKTA, Financial) is a cloud-native company specializing in identity and access management. Since its IPO in 2017, Okta has been dedicated to serving two primary client groups: workforces and customers. Its workforce solutions ensure secure access to both cloud-based and on-premises resources, while its customer offerings focus on secure application access. Despite a current stock price of $76.99, Okta's Fair Value (GF Value) is estimated at $144.84, suggesting a potential undervaluation. This article will explore Okta's financial metrics and intrinsic worth in detail.
Summarize GF Value
The GF Value is a unique measure that determines the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor for past returns and growth, and projected future business performance. The GF Value Line provides a benchmark for the stock's fair trading value. When a stock's price falls significantly below this line, it may indicate undervaluation, suggesting higher potential future returns. Conversely, a price well above the line could signal overvaluation and potentially lower future returns. Okta's current stock price positions it as significantly undervalued according to the GF Value, implying a promising outlook for long-term investors.
Financial Strength
Investing in companies with robust financial strength lowers the risk of capital loss. Okta's cash-to-debt ratio stands at 1.5, placing it below 57.43% of its peers in the Software industry. This figure, along with other financial metrics, contributes to Okta's financial strength rating of 5 out of 10, indicating a fair financial position.
Profitability and Growth
Profitable companies, especially those with a history of consistent profitability, present less investment risk. Okta, however, has faced challenges with profitability, reflected in its operating margin of -25.23%, ranking lower than 76.72% of competitors in the Software industry. Despite this, Okta's revenue growth over the past three years surpasses 85.96% of companies within its sector, although its EBITDA growth rate has lagged. Overall, Okta's profitability is rated 4 out of 10, signaling room for improvement.
ROIC vs. WACC
An analysis of a company's Return on Invested Capital (ROIC) compared to its Weighted Average Cost of Capital (WACC) can provide insights into its profitability. Okta's ROIC of -7.79 is currently below its WACC of 7.68, suggesting that the company is not generating sufficient returns on its investments.
Conclusion
Okta (OKTA, Financial) appears significantly undervalued when considering its GF Value. The company's fair financial standing and subpar profitability, coupled with its competitive growth rate, offer a mixed picture for investors. Those interested in a deeper understanding of Okta's financial health can explore 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.
