Companies are under constant threat of cyberattacks. We hear about the big ones, but day-to-day, this is an often overlooked aspect of the technology industry. One reason is that cybersecurity companies are doing a great job of protecting our technological infrastructure, but we still see too many breaches of security. This is why investors should pay attention to cybersecurity stocks.
As the world becomes more connected, it will require even more security from hackers looking to gain access to important information. And there are also those hackers who simply want to wreak havoc by shutting down systems. This makes stock in cybersecurity companies particularly appealing.
Either way, the demand for ever-improving security will continue to grow in the years ahead. Cybersecurity companies, and by extension, cybersecurity stocks, will be huge beneficiaries of that growth. There are two cybersecurity stocks in particular that I’m watching as potential standouts.
Cybersecurity Stocks to Watch
Zscaler (NASDAQ:ZS) is one the major players in the niche cloud cybersecurity sector. ZS helps protect its clients in the fast-growing world of the cloud. While the $5.2 billion company has been around for ten years, it is fairly new to the public market, having just begun trading on the NASDAQ in March.
It is quite common for early-stage companies to lose money in their high-growth years, so it is no surprise that ZS’ bottom line remains in the red. However, it saw revenue increase more than 50% in 2017 from the previous year, and strong growth is expected to continue for years to come.
ZS stock has gotten off to a fast start since its IPO earlier this year and it is already up an impressive 60%. While it will certainly see its share of ups and downs over the long-term, ultimately, I believe ZS stock will benefit greatly from the increased need for cybersecurity and it is a standout among other cybersecurity stocks.
ManTech International (NASDAQ:MANT) is another notable cybersecurity stock that has been around for a long time. It is a technology business that provides mission-critical security programs. In fact, MANT is a major partner to the U.S. government. MANT also provides the hardware used in the security process, which helps differentiate it from the new breed of cybersecurity stocks.
Revenue growth in 2017 came in at less than 10%, which was much slower than what we’ve seen in previous years. However, MANT stock trades at an attractive valuation of $2.6 billion and its price-to-sales ratio is 1.4. Zscaler’s is all the way up at 30.3.
ManTech has been in an uptrend for most of this year and it is currently trading well above both its 50- and 200-day moving averages (the blue and red lines, respectively). Even with it at all-time highs, I continue to see plenty of upside for this growing company.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.