Okta Inc (OKTA, Financial) experienced a daily loss of 3.89%, and over the past three months, the company's stock has gained 11.88%. Despite reporting a Loss Per Share of 3.69, Okta (OKTA) is considered significantly undervalued according to GuruFocus' valuation method. The following analysis provides a comprehensive evaluation of Okta's intrinsic value, financial strength, profitability, and growth prospects.
Introduction to Okta Inc (OKTA, Financial)
Okta is a cloud-native security company specializing in identity and access management. The San Francisco-based firm went public in 2017 and primarily serves two key client stakeholder groups: workforces and customers. Okta's workforce offerings allow a company's employees to securely access its cloud-based and on-premises resources. The firm's customer offerings enable its clients' customers to securely access the client's applications. With a market cap of $13.80 billion and sales of $2.10 billion, Okta's stock price stands at $84.04, significantly lower than its GF Value of $248.77.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should ideally trade at. If the stock price is significantly above the GF Value Line, the stock may be overvalued, and its future return is likely to be poor. On the other hand, if the stock price is significantly below the GF Value Line, the stock may be undervalued, and its future return will likely be higher.
As per GuruFocus' valuation method, 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 of Okta
Assessing the financial strength of a company is crucial before investing in its stock. Companies with weak financial strength pose a higher risk of permanent loss. Key indicators like the cash-to-debt ratio and interest coverage can provide valuable insights into the company's financial strength. Okta has a cash-to-debt ratio of 1.34, which is lower than 61.47% of 2751 companies in the Software industry. The overall financial strength of Okta is 6 out of 10, indicating fair financial health.
Profitability and Growth of Okta
Investing in profitable companies is generally less risky, especially if the companies have demonstrated consistent profitability over the long term. Okta has been profitable 0 years over the past 10 years, with revenues of $2.10 billion and a Loss Per Share of $3.69 in the past 12 months. Its operating margin of -30.66% is worse than 77.96% of 2731 companies in the Software industry. Overall, GuruFocus ranks Okta's profitability as poor.
Growth is a crucial factor in the valuation of a company. Okta's 3-year average revenue growth rate is better than 86.41% of 2413 companies in the Software industry. However, Okta's 3-year average EBITDA growth rate is -44.7%, which ranks worse than 92.14% of 2010 companies in the Software industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to assess its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Okta's ROIC was -8.93, while its WACC came in at 8.31.
Conclusion
In summary, Okta (OKTA, Financial) is significantly undervalued. The company's financial condition is fair, but its profitability is poor. Its growth ranks worse than 92.14% of 2010 companies in the Software industry. To learn more about Okta stock, you can check out its 30-Year Financials here.
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