• If you are wondering whether Okta at around US$72 a share still offers value or too much risk, the starting point is understanding how the current price lines up with the underlying business.
• The stock has had a mixed run, with a 6.3% gain over the last week, an 8.3% decline over the past month, and returns of 13.9% lower year to date and 26.5% lower over the last year.
• These moves sit against a backdrop of ongoing attention on identity and access management providers like Okta. This includes ongoing interest in security, reliability, and customer adoption across cloud based services. Market commentary has focused on how these themes influence sentiment toward companies operating in cybersecurity and digital identity more broadly.
• Okta currently holds a valuation score of 2 out of 6, which raises questions about which methods best capture its worth today and sets up a closer look at traditional valuation tools. A different way of thinking about value is introduced at the end of this article.

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 might be worth by projecting its future cash flows and then discounting those back to today using a required rate of return. It is essentially asking what those future dollars are worth in present terms.

Okta currently generates last twelve month free cash flow of about $859.7 million. Analysts have provided a series of cash flow projections, which are then extended using a 2 Stage Free Cash Flow to Equity approach. For example, projected free cash flow for 2031 is $1,302.45 million, and there is a full path of annual estimates between 2026 and 2035 that are discounted back to today using the DCF model.

On this basis, the model points to an estimated intrinsic value of around $111.76 per share. Compared with the current share price near $72, the implied discount is about 35.6%. Under these DCF assumptions, the shares are assessed as undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Okta is undervalued by 35.6%. Track this in your watchlist or portfolio, or discover 58 more high quality undervalued stocks.

Approach 2: Okta Price vs Earnings

For profitable companies, the P/E ratio is a familiar way to think about value, because it links what you pay for each share directly to the earnings that support that share price. It gives you a simple, comparable yardstick across businesses that are generating profits.

In general, higher growth expectations or lower perceived risk can justify a higher P/E, while slower growth or higher risk tends to line up with a lower, more conservative P/E. Okta currently trades on a P/E of 54.20x. That is above the IT industry average of 21.78x and also above the peer group average of 36.35x, which may prompt questions about what is built into the price.

Simply Wall St’s Fair Ratio for Okta is 31.45x. This is a proprietary estimate of what Okta’s P/E might look like once factors such as earnings growth, profit margins, industry, market cap and key risks are considered together. That makes it more tailored than a simple comparison with peers or the broad industry, which may not share the same risk profile or earnings characteristics. Comparing 54.20x with the Fair Ratio of 31.45x suggests the shares trade on a richer multiple than that framework would indicate.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Okta Narrative

Earlier it was mentioned that there is an even better way to understand valuation, and on Simply Wall St that takes the form of Narratives, where you set out a clear story for Okta, link that story to your own revenue, earnings and margin assumptions, and arrive at a Fair Value that you can compare to the current share price.

A Narrative is simply your view of how Okta’s business plays out, captured in numbers rather than just opinions. You are not only saying that identity security for AI agents could be important; you are also deciding what that might mean for Okta’s revenue in a few years, its profit margin and the P/E you think is reasonable.

On the Community page, which is used by millions of investors, Narratives on Okta already span a wide range. Some investors align with a higher Fair Value near US$133.38 and others are closer to a lower Fair Value around US$75.03. Each Narrative updates automatically as new news, earnings and guidance arrive so you can see in real time whether your Fair Value still supports buying, holding or selling at the current price.

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.