Is Okta’s Recent Rally Justified After Refocusing on Identity and Access Management?

• If you are wondering whether Okta is genuinely a comeback story or just another pricey growth name in cybersecurity, you are not alone. It is exactly the kind of setup where valuation really matters.
• After a bumpy few years, the stock has climbed to around $90.59, with a 3.2% gain over the last week, 7.9% over the past month, and 14.9% year to date, even though the 5 year return is still down 68.3%.
• Recent headlines have focused on Okta tightening its focus on identity and access management as enterprises consolidate security vendors. At the same time, the broader market has been rewarding companies seen as central to the long term cybersecurity stack. Sentiment has improved as investors look past earlier volatility and reassess whether Okta is now positioned as an essential, rather than optional, security platform.
• Right now, Okta scores a 2 out of 6 on our valuation checks, suggesting pockets of undervaluation but also areas where the price already bakes in optimism. Next, we will unpack how different valuation approaches see the stock, then finish with a more holistic way to judge whether the current price truly makes sense.

Okta scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Okta Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by projecting all the cash it could generate in the future and discounting those cash flows back to today in dollar terms.

For Okta, the latest twelve month free cash flow is about $888.3 million. Analysts and internal estimates expect this to rise steadily, with projected free cash flow of roughly $1.32 billion by 2030, based on a two stage Free Cash Flow to Equity model. Near term forecasts come from analysts, while cash flows further out are extrapolated to reflect a maturing but still growing cybersecurity business.

Bringing all those future dollar cash flows back to today, the DCF model arrives at an intrinsic value of about $123.33 per share. Compared with the recent market price around $90.59, the model implies that Okta is trading at roughly a 26.5% discount.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Okta is undervalued by 26.5%. Track this in your watchlist or portfolio, or discover 909 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

For profitable companies like Okta, the price to earnings ratio is a useful way to gauge how much investors are willing to pay today for each dollar of current earnings. A higher multiple can be justified when a business has strong growth prospects and a resilient competitive position, while slower growth or higher risk usually calls for a lower, more conservative PE.

Okta currently trades on a rich 82.33x PE, well above the broader IT industry average of about 29.77x and a peer average near 28.75x. Simply comparing those figures might suggest the stock is expensive, but it also ignores company specific factors that can reasonably support a premium.

That is where Simply Wall St’s Fair Ratio comes in. It estimates what Okta’s PE should be, given its earnings growth outlook, margins, industry, market cap and risk profile. For Okta, the Fair Ratio sits at 36.10x, which is materially lower than the current 82.33x. This implies that even after allowing for its growth and quality, the market is pricing in a lot of optimism.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1457 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Okta Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. These are simply your own story about a company, translated into assumptions about its future revenue, earnings, margins and fair value, then compared with today’s price to help guide buy or sell decisions.

On Simply Wall St’s Community page, Narratives make this process accessible to everyone by linking a clear written thesis about Okta to a structured forecast and a live fair value estimate that updates dynamically as new earnings, news and product developments come in.

For Okta, one investor might build a cautious Narrative that assumes slower identity market growth and more competition, leading to a fair value closer to $75 per share. Another might emphasize durable cloud demand and AI security tailwinds and arrive at a fair value near $148. Both can then compare their view with the current market price to see whether their Narrative suggests Okta is undervalued or overvalued.

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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