Bargains have been harder to come by lately due to the stock market's rally this year. And the increasingly optimistic investor sentiment around growth stocks is making that category even more expensive when compared to the prices available to investors in late 2022.
But there are still good options for patient investors seeking compelling deals. Let's look at a few of these winning businesses that are attractively valued today relative to their impressive growth prospects.
1. Crocs
Crocs (CROX -1.97%) has come a long way from being just a fad-driven shoe specialist with limited growth potential. That progress was supercharged by big strategic shifts in the past decade, including the company's 2022 acquisition of the Hey Dude brand. That purchase gave it a large, more diverse presence across the casual footwear industry. Toss in strong growth in its core molded footwear brands, and Crocs' quarterly revenue haul is now above $1 billion, up from around $300 million back in 2019.
Yet Wall Street is running away from the stock right now. Shares declined 14% in 2023 compared to an 18% spike in the S&P 500. You can currently buy Crocs for 1.5 times annual sales, down from about 2.5 times sales in the early spring.
It's true that Crocs is seeing weaker demand from its retailing partners as consumer spending slows. Industry peers including Nike are facing the same challenges. But its lower valuation fully reflects those short-term challenges and likely sets investors up for an impressive bull run from here.
2. Okta
There's a long list of smart-sounding reasons why Okta (OKTA -1.66%) stock is underperforming the market this year.
The cybersecurity specialist's revenue growth is slowing as IT companies tighten their budgets, for one. Okta took a financial hit from the acquisition of Auth0, which proved more expensive to integrate into the wider business than management had initially projected. There's also concern around recent data breaches that threaten to harm its brand.
Yet this software-as-a-service provider still looks incredibly strong. Revenue last quarter rose 23%, and investors are expecting to see similarly robust rates of 20% growth for the full fiscal year when Okta reports Q4 results in late November.
Okta is positioned well in the cybersecurity and digital identity management spaces, two areas that remain a priority for most companies even as they look to save cash elsewhere in the IT budget.
And the stock's valuation is compelling. Shares are trading at around 5.5 times annual sales compared to about 12 times sales for rivals like Microsoft and Palo Alto Networks. Sure, Okta doesn't enjoy the same economic clout as Microsoft or the impressive cash flow that Palo Alto Networks boasts. Free cash flow is about 10% of revenue today compared to Palo Alto Networks' near-40% rate.
Investors hoping to go along for an exciting bullish ride might still want to own Okta as it moves in that direction over the next several years. Gaining market share in this competitive industry won't be easy, but Okta seems to have all the ingredients it needs to generate solid returns for patient shareholders.
