Currently:
CRWD has a PS of about 37
OKTA has a PS of about 27
But if CRWD’s revenue will grow 85% over the next year and OKTA’s will grow 45%:
CRWD has a FWD PS of about 20
OKTA has a FWD PS of about 19
And if the year after that CRWD’s revenue will grow 65% and OKTA’s will grow 40%:
CRWD has a 2YR FWD PS of about 12
OKTA has a 2YR FWD PS of about 14
And even at the end of those two years, CRWD will likely be growing faster than OKTA, and therefore while 14 might be low for OKTA, 12 will be extremely low for CRWD. So you can make the case that CRWD’s current price is cheaper than OKTA’s, even though CRWD’s PS ratio is currently much higher.
This is a simple illustration (granted, with a lot of made up numbers), but useful to do from time to time to remember how this works. I use these two stocks because I actually do feel this way about them. I don’t know how close my guesses above will be to the actual growth rates, but in general this is why I hold more CRWD than OKTA.
Bear
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But what it boils down to when you’re looking even two years out, 8 whole quarters, is the CAP of these companies. My grasp of these 2 is admittedly not great, but from the limited reading around them I would argue that OKTA’s platform and offerings are less likely to be disrupted than crowds. CRWD’s growth rate is amazing, and clearly at 100% growth rate, it is something companies want. So despite the above math, I myself would feel more comfortable owning OKTA than CRWD at these levels (I own neither and sold OKTA exactly 1 year ago! oh well). If you could argue that the CAP of crwd is better or even just as good as as OKTA, then CRWD is the better buy.
Same thing with Zoom. People are modelling the growth rate several years out to justify the price. That’s fine, but you really need to believe the story about changing the way companies communicate. Believe the majority of enterprise follow the network effect and have zoom rooms. Believe the zoom phones and whatever other products they have in the pipeline can be a significant revenue growth driver for them.
The OKTA platform - not only will they grow with more customers, but they can continuously add to their platform and upsell to the current customers. The platform, once a buy-in by a business occurs, seems to be far more sticky than zoom, and perhaps also crwd?
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Currently:
CRWD has a PS of about 37
OKTA has a PS of about 27
But if CRWD’s revenue will grow 85% over the next year and OKTA’s will grow 45%:
CRWD has a FWD PS of about 20
OKTA has a FWD PS of about 19
And if the year after that CRWD’s revenue will grow 65% and OKTA’s will grow 40%:
CRWD has a 2YR FWD PS of about 12
OKTA has a 2YR FWD PS of about 14
This is probably obvious to most, but the only way those PS numbers come down as you noted is if the stock price stays the same for those two years (actually due to dilution the stock price would have to go down). So if anyone is holding them with the thought that the PS will be 12 or 14 in two years, well that is not a pretty bad plan.
No position in either currently, but a lot more interested in CRWD.
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