Okta Inc (OKTA)

Conclusion

Okta is an identity software company whose products include single sign-on, adaptive multi-factor authentication and identity governance for businesses. At 177.57 USD on 2026-11-09, its market capitalisation is 29.68 billion USD and its enterprise value is 27.43 billion USD.

The verdict is fair. The price-to-sales ratio of 9.66 is below its ten-year median of 12.71, and the price-to-free-cash-flow ratio of 30.53 is far below its median of 214.59. The P/E of 100.27 and EV/EBITDA of 66.59 are high, though each rests on only two historical points. The DCF gives 118.36 USD per share at a discount rate of 8.9%, while the fair value from historical multiples is 233.75 USD. The fair value band runs from 140.84 to 211.26 USD with a midpoint of 176.05 USD, a margin of safety of -0.85%. The reverse DCF implies growth of 20.7% a year, against revenue growth of 28.4% over five years and free cash flow per share growth of 40.7%.

The strongest numbers are net cash, with net debt to EBITDA at -5.45, trailing free cash flow conversion of 3.28, and revenue growth in all 10 comparable years. The weakest are ROIC of 6.4% against a WACC of 8.9%, a ROIC minus WACC of -2.5%, stock-based compensation equal to 16.4% of revenue, and a five-year share count growth of 7.1%.

Financial health

Financial health is green, held up by net cash and strong coverage: the current ratio, net debt to EBITDA, interest coverage and the Altman Z-score are all assessed as good. The current ratio is 1.53 and the quick ratio 1.37. Net debt to EBITDA is -5.45, which means net cash, and debt to equity is 0.76%. Interest coverage is 109x on a trailing basis. The Altman Z-score is 8.46, in the safe zone, although the Altman model was designed for manufacturers and this is a software company, so the reading is indicative only. Insolvency risk: low, about 0.06% by the estimate of the Ohlson model over one to two years.

Earnings quality

Earnings quality is yellow, because strong cash generation is offset by dilution and heavy stock-based pay. Trailing free cash flow conversion is 3.28, while the five-year figure is not available. The accrual ratio is -6.78%. Stock-based compensation is 16.4% of revenue, and free cash flow after it is 469 million USD. The share count has grown at 7.1% a year over five years, so buybacks have not reduced the count. The Piotroski score is 7 out of 8 evaluable points. The Beneish M-score is not available. The company beat earnings estimates in all 8 recent quarters, with an average surprise of 14.8%. Over the last 30 days, 42 analysts raised the current-year estimate and none lowered it; for next year, 37 raised and 4 lowered, with expected growth of 11.4%.

Profitability

Profitability is yellow. The gross margin is 78.1% against a ten-year median of 72.2%. The operating margin is 7.7% against a median of -30.8%, and the net margin is 9.6% against a median of -33.8%. Operating margin stability is 0.63. Return on invested capital is the weak point: ROIC is 6.4% against a WACC of 8.9%, a ROIC minus WACC of -2.5%, and the five-year median ROIC is -6.1%. Return on equity is 4.2%. The DuPont split shows a net margin of 8.05%, an asset turnover of 0.30 and an equity multiplier of 1.39, so leverage is not inflating the return on equity; the low return comes from a small margin on a slow-turning asset base.

Growth

Growth is green. Revenue compound growth is 16.3% over three years, 28.4% over five years and 42.3% over ten years. Revenue grew in all 10 comparable years. Free cash flow per share grew at a compound rate of 129.4% over three years and 40.7% over five years. Compound EPS growth is not available. The rates have slowed as the period shortens, and the expected growth in the next fiscal year is 11.4%.

Valuation

Valuation is yellow, with the verdict fair. Against their ten-year medians, the price-to-free-cash-flow ratio is at a premium of -85.8% and the price-to-sales ratio at -24.0%, while the price-to-book ratio is at a premium of 20.9%, with a median of 3.52 against a current 4.26. The P/E of 100.27 and EV/EBITDA of 66.59 have no reliable median, as only two points exist. The DCF gives 118.36 USD per share, using a discount rate of 8.9%, first-stage growth of 20% and terminal growth of 2.5%; the terminal value accounts for 63.2% of it. The fair value from historical multiples is 233.75 USD. The fair value band is built on fixed assumptions and is not a price target. The reverse DCF implies growth of 20.7%, a gap of -7.7% against five-year revenue growth and -20.0% against five-year free cash flow per share growth. The company pays no dividend.

Risks

The weakest number is the return on invested capital, which sits below WACC: ROIC of 6.4% against 8.9%. If this persists, new investment would not add value. Stock-based compensation at 16.4% of revenue and a share count growing 7.1% a year dilute existing owners, and the price-to-book premium of 20.9% leaves less room for error. The Altman score is safe, but that model was not designed for software. The DCF depends on the terminal value for 63.2% of its result. Not available: the five-year free cash flow conversion, the Beneish M-score, compound EPS growth, and a reliable median for the P/E and EV/EBITDA. This analysis has no debt maturity schedule and no revenue by segment, so it cannot assess refinancing timing or which products drive growth.