With a $38 billion market capitalization, Palo Alto Networks, Inc. (PANW) is a prominent global cybersecurity player that is shaping the world’s cloud-centric future with advanced security features. However, except for fiscal 2012, the company has consistently reported annual losses since its inception. As a result, it had an accumulated deficit of $1.2 billion as of July 31, 2020. Also, PANW has been acquiring complementary companies, products, or technologies as a part of its business strategy.
Last November, PANW acquired Expanse, Inc. and Sinefa Group, Inc. for a combined cost of approximately $844 million. These acquisitions have proved to be somewhat of an ongoing business disruptor that has diverted management’s attention. The company has not been very successful in managing the acquired companies’ integration process in a timely manner.
Though analysts expect PANW’s revenue and earnings to increase significantly in the future, its future acquisitions could well weigh on its profitability, given its track record in managing acquisitions.
There is little doubt that organizations are increasingly instituting multi-layered risk-mitigation strategies to secure cloud workloads and endpoints. This is evidenced by Global X Cybersecurity ETF’s (BUG) 59.7% returns over the past year. And PANW will be a beneficiary. But we think there are other stocks in the cybersecurity space that are better positioned than PANW to ride the industry wave.
Tenable Holdings, Inc. (TENB), Qualys, Inc. (QLYS), and Radware Ltd. (RDWR) are three such stocks. They are profitable and have strong track records of revenue growth. These companies are continuously broadening their market reach and will likely deliver promising returns this year.
Tenable Holdings, Inc. (TENB)
TENB operates as a cyber-security software as a service company and is focused on building on its deep technology expertise in the traditional vulnerability assessment and management market to provide analytics that translate vulnerability data into business insight. Its enterprise platform offerings include Tenable.io and SecurityCenter.
On February 10, TENB announced that it had entered an agreement to acquire Alsid SAS, a leader in Active Directory security, for $98 million in cash. The investment will enable the company to help its customers anticipate future cyber attacks by providing users with a better, more complete approach to cyber-threat preparedness.
Earlier in January, TENB received Common Criteria Certification from the National Information Assurance Partnership (NIAP) by undergoing strict testing and security requirements. The certification certifies that the company’s commercial IT products meet security requirements for use in U.S. national security systems.
TENB revenues have increased 21.7% year-over-year to $118.08 million in the fourth quarter ended December 31, 2020. Its Non-GAAP income from operations has risen 138.4% from their year-ago value to $15.42 million, while its non-GAAP EPS has improved 118.2% to $0.13 over the same period. Its free cash flow grew 124.1% year-over-year to $16.73 million over the three- month period.
Analysts expect TENB’s revenues to grow 19.9% year-over-year to $119.91 million in the current quarter, ending March 31, 2021. A consensus EPS estimate of $0.06 for the current quarter represents a 166.7% improvement from the year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 58.2% over the past year.
TENB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
TENB has a B grade for Growth, Quality, Momentum and Sentiment. Within the B-rated Software – Security Industry, it is ranked #4 of 24 stocks.
In total, we rate TENB on eight different levels. Beyond what we’ve stated above, we have also given TENB grades for Stability and Value. Get all TENB’s ratings here.
Qualys, Inc. (QLYS)
QLYS provides information technology (IT), security, and compliance solutions through its cloud-based platform. The Company enables organizations to identify security risks to their information technology (IT) infrastructures by streamlining and consolidating their security and compliance solutions on a single platform.
In December, QLYS established a new Cloud platform in the UAE to support several local compliance requirements, such as the Abu Dhabi Systems and Information Centre’s (ADSIC) Information Security Policy and the UAE Information Assurance Regulation. Thereby, expanding its global footprint.
This month, QLYS announced that it is expanding the power of VMDR (Vulnerability Management, Detection and Response) to mobile devices with support for Android and iOS/iPadOS to deliver an end-to-end solution for mobile device security. This will provide users in-depth mobile device visibility, data security insights, proactive posture monitoring, and automated response for all iOS and Android devices and installed apps.
QLYS revenues have increased 12% year-over-year to $94.80 million in the fourth quarter, ended December 31, 2020. Its adjusted EBITDA has risen 17.3% from the year-ago value to $43.39 million, while its EPS has improved 15.1% to $0.61 over the same period.
Analysts expect QLYS’ revenues to grow 10.3% year-over-year to $95.19 million in the current quarter, ending March 31, 2021. A consensus EPS estimate of $0.68 for the current quarter represents a 4.6% improvement from its year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 9.7% over the past year.
QLYS’ POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to a Buy in our rating system. QLYS has a Quality Grade of A and a Momentum Grade of B. It is currently ranked #10 of 24 stocks in the same industry.
We also have given QLYS grades for Stability, Value, Growth and Sentiment. Get all of QLYS’ ratings here.
Radware Ltd. (RDWR)
Based in Israel, RDWR is a global leader of cyber security and application delivery solutions for physical, cloud, and software defined data centers. Its solutions include application and network security, and application delivery. The company’s products and activities are focused on protecting against cyber-attacks and ensuring optimal application service level for enterprises’ and carriers’ data centers.
This month , RDWR announced that the company had customized its on-demand cloud DDoS Mitigation service for regional education network providers across the U.S. This is designed to protect educational and research organizations against cyber-attacks that compromise student, staff, and faculty information.
Earlier this month, a Polish data center operator, Atman, chose RDWR’s DefensePro attack mitigation solution to provide DDoS protection and mitigation to its own infrastructure and to offer managed anti-DDoS-as-a-Service solutions to its customers as a new revenue opportunity. This will enable RDWR to expand its business operations and substantially improve its revenues.
RDWR has enjoyed strong business performance in the security offerings, cloud and subscription businesses. This is reflected in record ARR, bookings and revenues. RDWR’s revenues have increased 2.5% year-over-year to $69.05 million in the fourth quarter, ended December 31, 2020. Its Cloud and Subscriptions ARR have grown 35% year-over-year. The company recorded year-end ARR of $174 million, up 12% from the year-ago value, while its gross profit rose 2.6% year-over-year to $57.37 million over the three- month period.
Analysts expect RDWR’s revenues to grow 7.6% year-on-year to $268.94 million in its fiscal 2021 ending December 31. A consensus EPS estimate of $0.69 for the current year represents a 7.8% improvement year-on-year. The stock has gained 18.7% over the past year.
RDWR has an overall rating of B, which equates to Buy in our POWR Ratings system. RDWR has a grade of B for Stability and Growth and an A for Quality. In the same industry, the stock is ranked #7.
Click here to see the additional POWR Ratings for RDWR (Momentum, Value, and Sentiment).
The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
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TENB shares were trading at $44.08 per share on Monday afternoon, down $0.76 (-1.69%). Year-to-date, TENB has declined -15.65%, versus a 4.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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