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If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the Okta, Inc. (NASDAQ:OKTA) share price is up 82% in the last year, clearly besting the market return of around 15% (not including dividends). That's a solid performance by our standards! We'll need to follow Okta for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
Okta isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Okta saw its revenue grow by 51%. That's well above most other pre-profit companies. While the share price gain of 82% over twelve months is pretty tasty, you might argue it doesn't fully reflect the strong revenue growth. If that's the case, now might be the time to take a close look at Okta. Since we evolved from monkeys, we think in linear terms by nature. So if growth goes exponential, opportunity may exist for the enlightened.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think Okta will earn in the future (free profit forecasts).
A Different Perspective
It's nice to see that Okta shareholders have gained 82% over the last year. That's better than the more recent three month gain of 0.5%, implying that share price has plateaued recently. Having said that, we doubt shareholders would be concerned. It seems the market is simply waiting on more information, because if the business delivers so will the share price (eventually). Before spending more time on Okta it might be wise to click here to see if insiders have been buying or selling shares.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.