Cybersecurity is a critical service for businesses as cyberattacks continue to grow. A report cited a 38% increase in cyberattacks from 2021 to 2022. Becoming the victim of a cyberattack can cost companies millions of dollars in lost data, trust, and legal fees.
The dangers of cyberattacks loom over any business, especially corporations that naturally have bigger targets on their backs. Cybersecurity companies offer several layers of protection and can keep companies safe from hackers. As these companies’ services continue to remain in strong demand, the best cybersecurity stocks can generate significant momentum in the years to come.
Investing in cybersecurity stocks gives you exposure to this opportunity. Investors looking to get involved in the industry may want to grab these top cybersecurity stocks to buy.
CrowdStrike (CRWD)
CrowdStrike (NASDAQ:CRWD) has rewarded investors with a 46% year-to-date gain, and returns have exceeded 130% over the past five years. The company has been no stranger to high revenue growth, as it notched a 42% year-over-year revenue increase in the first quarter.
The company surprised investors with positive GAAP net income. While the company only made $0.5 million, it’s nice to see the company not bleed money for a quarter. The company also has a large cash position of $2.93 million as of April 30, 2023, and it generated net cash of $300.9 million in the first quarter.
The company’s ventures into artificial intelligence (AI) through Charlotte AI can fuel more growth for the stock. Crowdstrike currently has a 63 forward P/E ratio which is a bit high, but cybersecurity investors often find themselves with high P/E ratios or unprofitable companies with high revenue growth.
CrowdStrike’s firm position as a top cybersecurity solution, high revenue growth, and the jump to profitability can help the stock generate solid long-term gains.
Fortinet (FTNT)
Fortinet (NASDAQ:FTNT) shares are up 61% year-to-date, and 5-year gains are close to 500%. While other cybersecurity stocks exhibit high revenue growth and little to no profits, Fortinet has growing revenue and earnings.
The company enjoyed 32.2% year-over-year revenue growth and 79.0% year-over-year net income growth in the first quarter. Fortinet’s profit margin came in at 19.62% in Q1.
The company is no stranger to profits, despite the industry’s reputation. Fortinet has been GAAP profitable and free cash flow positive every year since its IPO in 2009. Management projects a 22% compounded annual growth rate for revenue from now until 2025.
Fortinet gives companies a cost-effective way to get high-quality cybersecurity services. Business owners get to enjoy a streamlined solution with Fortinet instead of having multiple tools that make it more difficult to monitor and track cybersecurity efforts.
The company embraces simplicity with its products and has rewarded long-term investors. FTNT is a top cybersecurity stock to buy if you want exposure to the industry.
Palo Alto Networks (PANW)
Palo Alto Networks (NASDAQ:PANW) shares have jumped by 76% year-to-date and are up by 250% over the past five years. The company has achieved double-digit net income growth over the past few quarters and had a 6.26% net profit margin in the most recent quarter.
During that quarter, Palo Alto Networks reported 24% year-over-year revenue growth and 247% year-over-year net income growth. The company reported its 4th consecutive quarter of positive GAAP net income and found itself in a good position to continue that trend.
Net profit margins have quickly ballooned from 0.21% to 6.26% during that 4-quarter stretch. The company’s trailing P/E is 377 times, which is quite lofty, but the forward P/E is a more manageable 50 times. Management also projects 25%-27% year-over-year revenue growth in the upcoming quarter, representing acceleration from the previous quarter’s results.
The company’s continued top-line growth and profit margin expansion can support a lower P/E in the future and make this price point look like a bargain in a few years.
On this date of publication, Marc Guberti held a long position in FTNT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
