Shares of Zoom Video Communications (ZM -0.10%) and Okta (OKTA -4.18%) have both underperformed the market in the past year, but for very different reasons. Zoom is struggling to boost sales following the pandemic spike, yet remains highly profitable. Okta, on the other hand, is growing quickly but losing money.

Both software-as-a-service (SaaS) companies have announced fresh data on their recent operating trends. So let's compare them to see which looks like a better buy for investors today.

Latest growth trends

There's a stark difference between Zoom and Okta when it comes to growth expectations. Most Wall Street pros are looking for Okta's sales to rise by about 17% this year, thanks to a growing cybersecurity industry and contributions from the company's Auth0 acquisition. Zoom, in contrast, is projecting just 2% higher sales in the fiscal year that started in early February.

Both companies are relying on enterprise tech spending to power their results. That division was a bright spot in Zoom's latest results, up 18% in fiscal Q4. Okta is seeing steady demand from enterprises right now, too, although IT spending is slowing today and might be further pinched by a recession.

The edge on profits

While Okta wins the growth matchup, Zoom is in a much stronger financial position. The work collaboration specialist generated $1.2 billion of free cash flow last year, or 27% of sales. Management is projecting a similarly strong outing for the new fiscal year, too. Zoom is also sitting on over $5 billion of cash.

Okta, meanwhile, booked only a 3% free cash flow margin this past year, marking a deceleration from the prior year's 7% rate. The cybersecurity specialist is still dealing with the financial disruption caused by its large merger with Auth0, as well as subsequent challenges around integrating the businesses under one sales, marketing, and support umbrella.

Valuation and outlook

Investors are currently putting a premium on growth, which helps explain why Okta is valued at over 7 times annual sales, while Zoom is valued at just 4.8 times sales. Okta is expected to boost revenue by about 17% this year, indicating steady progress in its goal of dramatically increasing its addressable market over time.

ZM PS Ratio Chart

ZM PS Ratio data by YCharts

Meanwhile, Zoom has built up its platform of services and is boosting contract sizes thanks to that success. But the business might see continued stress from shrinking its consumer-focused division. Revenue growth is, in fact, likely to decelerate a bit from this past year's 4% increase.  

Zoom still looks like the more attractive stock for risk-averse growth stock investors. While the timing of its growth rebound is uncertain, the company's ample cash savings should allow it to navigate a deteriorating selling environment. Okta, meanwhile, could post a third consecutive year of net losses in 2023 even as it targets a wider selling footprint.

Neither software stock would be immune from the effects of a recession, should one develop this year. But Zoom isn't as financially stressed and is valued at a discount compared to Okta. Those assets could prove valuable for shareholders through the volatility that's likely in the year ahead.