Does Okta’s Security Expansion Signal a Buying Opportunity After 17% Price Jump?

• Wondering if Okta's stock price reflects its real value? You're not alone, and there are plenty of interesting signals to consider before making a decision.
• Okta's share price has seen ups and downs, rising 17.4% over the past year but dipping 2.6% in the last week and 6.8% over the past month. This suggests mixed sentiment or shifting risk outlooks.
• Recent headlines highlight Okta's investments in security technology partnerships and expanded authentication offerings. Both of these developments have boosted investor hopes for long-term relevance and growth. Some analysts are also discussing how the broader tech sector’s volatility is impacting companies like Okta, putting extra attention on how it fits into evolving digital infrastructure trends.
• When it comes to valuation, Okta scores a 3 out of 6 on our checklist of undervaluation factors so far. This is a respectable result, but what if there is a smarter lens to use? Stay with us as we break down the usual valuation approaches and reveal a fresher perspective by the end of the article.

Find out why Okta's 17.4% return over the last year is lagging behind its peers.

Approach 1: Okta Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and then discounting them back to today's dollars. This method helps investors understand what a company is truly worth based on expected performance rather than just current market sentiment.

For Okta, analysts report a most recent Free Cash Flow (FCF) of $830.2 Million. Looking ahead, forecasts see FCF growing steadily, with estimates reaching $1.28 Billion by 2030. It is important to note that these long-term numbers are extrapolations beyond the first five years of analyst coverage, so they carry more uncertainty. The model used for Okta is a two-stage Free Cash Flow to Equity approach, reflecting both near-term analyst projections and longer-term trends estimated by Simply Wall St.

Based on these projections, the DCF model calculates an intrinsic value for Okta's stock at $116.23 per share. Given that this figure is about 25.2% higher than the current market price, the analysis suggests Okta is significantly undervalued according to this traditional valuation view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Okta is undervalued by 25.2%. Track this in your watchlist or portfolio, or discover 841 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Okta.

Approach 2: Okta Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a trusted benchmark for assessing profitable companies like Okta because it directly links a company's market price to its underlying earning power. For established businesses posting positive earnings, the PE ratio gives investors a straightforward view of how much they are paying for each dollar of profit and offers a basis for comparison across the sector.

Growth expectations and perceived risks play a big role in shaping what counts as a “normal” or “fair” PE ratio. Companies with above-average growth or lower risk profiles typically command higher PE multiples, while those with slower prospects or higher uncertainties often see theirs traded down.

Currently, Okta trades at a PE ratio of 91.26x. In comparison, the average for its IT industry peers sits at 28.91x, and the peer group is around 30.10x. Simply Wall St has developed a “Fair Ratio,” a proprietary benchmark that calculates, given Okta’s specific growth potential, profit margins, risk profile, market cap, and industry context, a fair PE for Okta is 41.05x. This is notably below Okta’s current level, signaling a possible premium is being demanded by investors.

The “Fair Ratio” is a more insightful metric than a simple industry or peer comparison. It drills down into customized variables unique to Okta, such as its future earnings growth, risk, and size, as well as broader sector conditions, providing a tailored view of what Okta’s multiple should be if priced logically.

Comparing Okta’s current 91.26x PE to the Fair Ratio of 41.05x suggests the stock is trading well above what would be justified by its core fundamentals and outlook.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1411 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Okta Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your story or perspective about a company, where you connect the business’s strategy, strengths, and challenges directly to your own estimates of future revenue, earnings, and what you believe is a fair value. Narratives help you translate the bigger picture, like Okta’s product expansions or market risks, into a structured financial outlook that’s personal and actionable.

Using Narratives on Simply Wall St’s Community page, millions of investors are able to put their views into numbers, compare their fair value with the current market price, and see instantly whether the stock is a buy or a sell according to their own logic. Narratives are easy to use, update in real time when new results or news are published, and allow you to see how other investors are thinking. This approach sometimes helps spot blind spots or opportunities you might have missed.

For example, some investors publish highly optimistic Narratives for Okta with fair values around $148 per share, banking on sustained revenue growth and eventual margin expansion, while more cautious users assume challenges ahead and set fair values closer to $75. This demonstrates how your narrative shapes your view of whether it’s time to buy, hold, or sell.

Do you think there's more to the story for Okta? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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