CrowdStrike Holdings, Inc. (CRWD) in Sunnyvale, Calif., provides cloud-delivered solutions for endpoint and cloud workload protection in the United States, Australia, Germany, India, Israel, Romania, and the United Kingdom. In comparison, San Jose, Calif.-based McAfee Corp. (MCFE) is a cybersecurity company that provides various integrated security, privacy, and trust solutions to consumers, small- and medium-sized businesses, large enterprises, and governments worldwide.
The growing sophistication of cyberattacks and rapidly evolving threat landscape has fostered the cybersecurity industry’s growth over the past year. Companies and governments are making hefty investments to strengthen their security infrastructures and reform their security strategies to prevent potential data breaches.
Moreover, the digitization trends in almost every sector and the use of several cloud-based technologies have increased the risk of breaches. According to Grand View Research, the global cyber security market size is expected to grow at a 10.9% CAGR from 2021 – 2028. As prominent players in the industry, CRWD and MCFE are well-positioned to capitalize on increasing cybersecurity spending.
CRWD’s hares have gained 30.8% in price over the past six months, while MCFE has lost 9.4%. In terms of their past year’s performance, CRWD is the clear winner with 110.6% gains versus MCFE’s 21.7%. However, MCFE’s 36.4% gains year-to-date compares with CRWD’s 33.8% returns.
But which stock is a better buy now? Let’s find out.
On October 13, CRWD announced the CrowdXDR Alliance, which is a unified and open Extended Detection and Response (XDR) collaboration with security and IT operations leaders. The alliance aims to offer first-of-its-kind solutions to joint customers to protect their organizations from cyber threats. “Through this alliance, we will enable an out-of-the-box integrated XDR solution with real-time detections and threat hunting across all domains and extend comprehensive visibility, protection, and control across all environments,” said George Kurtz, chief executive officer of CrowdStrike.
In September, MCFE launched its online protection service, an industry-first personalized Protection Score, and an all-in-one Mobile Security app, which provide personalized and unified experiences focused on identity and privacy. The redesigned all-in-one mobile app is being launched in over 245 countries globally. This personalized offering should be widely demanded amid increasingly sophisticated cybercrimes.
Recent Financial Results
CRWD’s total revenues increased 69.7% year-over-year to $337.69 million in its fiscal second quarter, ended July 31. However, its loss from operations stood at $47.40 million, up 58.1% from the same period last year. In addition, its net loss grew 91.9% from the year-ago value to $57.32 million. The company’s EPS increased 78.6% year-over-year to $0.25.
For the second quarter, ended June 26, MCFE’s net revenues increased 21.9% year-over-year to $467 million. Its gross profit increased 28.6% year-over-year to $351 million, while its operating income grew 100% from its year-ago value to $156 million. The company’s EPS came in at $0.21.
Expected Financial Performance
Analysts expect CRWD’s revenue to increase 38.4% in the next year. The company’s EPS is expected to grow 66% in the next year. Furthermore, its EPS is expected to grow 73.6% per annum over the next five years.
MCFE’s revenue is expected to increase by 12% in the next year. Analysts expect its EPS to grow 23% in the next year and 11.2% per annum over the next five years.
MCFE is more profitable with EBIT and EBITDA margins of 9.94% and 15.66%, respectively, compared to CRWD’s negative 9.67% and 5.86%.
Furthermore, MCFE’s 3.48% and 7.76% respective ROA and ROTA compare with CRWD’s negative 2.89% and 5.44%.
Thus, MCFE is more profitable here.
In terms of forward EV/Sales, CRWD is currently trading at 45.34x, which is 81.8% higher than MCFE’s 8.24x. Also, CRWD’s 311.29 forward EV/EBITDA ratio is 93.7% higher than MCFE’s 19.76.
Thus, MCFE is relatively affordable here.
MCFE has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. In comparison, CRWD has an overall D rating, which translates to Sell. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
MCFE has a B grade for Value. This is justified because its 2.15 forward Price/Sales ratio is 47.3% lower than the 4.09 industry average. In contrast, CRWD has a grade of D for Value. Its 46.05 forward Price/Sales ratio is 1,025.7% higher than the industry average.
Both the stocks have a C grade for Momentum. This is justified because both are trading above their respective 50-day moving averages.
The information security market is growing substantially. Both CRWD and MCFE are well-known names to cash in on the industry tailwinds. However, we think its higher profitability and lower valuation make MCFE the better choice here.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Software – Security industry here. Also, click here to view the top-rated stocks in the Software – SAAS industry.
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CRWD shares rose $1.60 (+0.56%) in premarket trading Monday. Year-to-date, CRWD has gained 33.79%, versus a 22.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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