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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Okta, Inc. (NASDAQ:OKTA) share price has soared 260% in the last three years. How nice for those who held the stock! It's down 1.8% in the last seven days.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Because Okta made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 3 years Okta saw its revenue grow at 36% per year. That's much better than most loss-making companies. Meanwhile, the share price performance has been pretty solid at 53% compound over three years. But it does seem like the market is paying attention to strong revenue growth. That's not to say we think the share price is too high. In fact, it might be worth keeping an eye on this one.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Okta is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Okta will earn in the future (free analyst consensus estimates)
A Different Perspective
Okta shareholders are up 17% for the year. It's always nice to make money but this return falls short of the market return which was about 37% for the year. But the (superior) three-year TSR of 53% per year is some consolation. We prefer focus on longer term returns, as they are usually a more meaningful indication of the underlying business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Okta you should know about.
But note: Okta may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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