Is Okta Stock's 4.55X P/S Still Worth it? Buy, Sell or Hold?

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Okta OKTA shares are trading at a stretched valuation, as suggested by the Value Score of F.  In terms of the forward 12-month Price/Sales (P/S), OKTA is trading at 4.55X, a premium compared with the Zacks Internet Software Services industry’s 2.68X. 

However, Okta is significantly undervalued in comparison to its closest peers, including Microsoft MSFT, Palo Alto Networks PANW and CrowdStrike CRWD. 

Microsoft, Palo Alto and CrowdStrike shares are trading at P/S of 10.56X, 13.21X and 17.99X, respectively.

OKTA shares have been suffering from a challenging macroeconomic environment that has negatively impacted its business mix. Constrained budgets are hurting both the Customer Identity and Workforce Identity businesses.

Price/Sales Ratio (F12M)

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Nevertheless, OKTA’s portfolio strength is noteworthy, with strong demand for new products like Okta identity governance and Okta privileged access. An expanding clientele, driven by the strong adoption of its Identity Threat Protection solution, is a key catalyst for growth-oriented investors. 

So, what should investors do with OKTA shares at the current valuation? Let’s analyze.

OKTA’s Fiscal 2025 View Strong

Okta’s innovative portfolio bodes well for its prospects. 

For fiscal 2025, Okta expects revenues between $2.555 billion and $2.565 billion (up from previous guidance of $2.53-$2.54 billion), indicating 13% growth over fiscal 2024. 

The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $2.56 billion, indicating year-over-year growth of 13.2%. 

OKTA expects fiscal 2025 non-GAAP earnings between $2.58 per share and $2.63 per share (up from previous guidance of $2.35-$2.40 per share). 

The consensus mark for earnings is pegged at $2.61 per share, up a couple of cents over the past 60 days, suggesting 63.13% over fiscal 2024.

The free cash flow margin is now expected to be roughly 23% for fiscal 2025.

Earnings Estimate Trend Remains Steady

For the to-be-reported third-quarter fiscal 2025, the Zacks Consensus Estimate for Okta’s earnings has been steady at 57 cents over the past 60 days. The earnings figure suggests 29.55% growth year over year.

Okta’s earnings beat the Zacks Consensus Estimate in all of the trailing four quarters, the average surprise being 27.15%.

Okta, Inc. Price and Consensus

Okta, Inc. Price and Consensus
Okta, Inc. Price and Consensus

Okta, Inc. price-consensus-chart | Okta, Inc. Quote

 

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

The consensus mark for revenues is pegged at $649.42 million, indicating 11.2% growth over the figure reported in the year-ago quarter.

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