In terms of cynical relevance, it doesn’t get much better than cybersecurity growth stocks. While the digitalization ecosystem has fostered groundbreaking gains in connectivity and productivity, it also sparked worrying exposure to nefarious actions. To protect against these threats, both individual households and enterprises need robust defensive mechanisms.
It’s not just a narrative. According to Grand View Research, the global cybersecurity market reached a valuation of $222.66 billion last year. Further, the sector may expand by a compound annual growth rate (CAGR) of 12.3% by 2030. At the forecast culmination, the sector could be worth $500.7 billion. And that might be an underestimate.
McKinsey & Company points out that the arena could enjoy a total addressable market between $1.5 trillion and $$2 trillion. It’s not an unreasonable forecast since digital threats are constantly evolving. In addition, the cost of a data breach can be enormous. On that note, investors can stand to profit handsomely from the below cybersecurity growth stocks.
Palo Alto Networks (PANW)
One of the leading cybersecurity growth stocks, Palo Alto Networks (NASDAQ:PANW) offers a comprehensive suite of security solutions targeting enterprises. These solutions include network security, cloud security and endpoint protection. In addition, Palo Alto is well-known for developing advanced firewalls along with threat intelligence protocols. It’s a large-capitalization firm but it still has room for expansion.
Of course, a major benefit of a massive enterprise is market dominance. In the past four quarters, Palo Alto posted an average earnings per share of $1.40. The company beat all of its bottom-line targets during this one-year period. Indeed, the average earnings surprise came out to 12.35%, which is an impressive statistic.
In the trailing 12 months (TTM), Palo Alto posted net income of $2.45 billion or $6.92 per share. Revenue reached $7.79 billion. For fiscal 2024, EPS may expand by 25.45% to $5.57. On the top line, revenue may rise 16.1% to $8 billion. Again, it’s a big entity but it also qualifies as one of the cybersecurity growth stocks.
Fortinet (FTNT)
A global leader in integrate and automated cybersecurity solutions, Fortinet (NASDAQ:FTNT) offers a wide range of services. These include firewalls, encrypted virtual private networks (VPNs) and endpoint security. Its primary feature may be its FortiGate firewalls, which are well regarded by data center operators for their performance and security measures.
Financially, the company has beaten all of its past four bottom-line targets. During this period, the average EPS came out to over 43 cents. This print translated to an average earnings surprise of 14.38%. Another standout feature of FTNT is that it’s relatively undervalued. Shares trade at 8.68X trailing-year sales. In contrast, PANW trades at over 15X.
During the TTM period, Fortinet posted net income of $1.2 billion or earnings of $1.54 per share. Revenue in the cycle hit $5.4 billion. For fiscal 2024, experts anticipate EPS to expand by 8.6% to $1.77. On the top line, sales may rise 9.3% to hit $5.8 billion. While FTNT doesn’t offer the biggest expansion potential, it’s one of the cybersecurity growth stocks due to the relative value.
Zscaler (ZS)
Specializing in cloud security, Zscaler (NASDAQ:ZS) provides secure Internet access and zero-trust network access through its platform. A key standout attribute of Zscaler is that its services can protect users, applications and data irrespective of location. Further, its zero-trust architecture and specialization in secure access service edge (SASE) make it powerfully relevant to enterprises migrating to the cloud.
A resounding benefit of ZS stock is the underlying demand profile. In the past four quarters, Zscaler’s average EPS came out to almost 74 cents. This print translated to an average earnings surprise of 33.43%. To be fair, investors will be paying a premium for this demand. Presently, ZS stock trades at 14.51X trailing-year revenue.
Another factor to watch is that in the TTM period, Zscale did lose $73.5 million or 50 cents per share. However, sales jumped to $2.03 billion. Further, its most recent quarterly revenue growth rate (year-over-year) stands at 32.1%.
For fiscal 2024, analysts see a big jump in EPS to $2.98. Revenue may rise 32.3% to $2.14 billion, making ZS one of the cybersecurity growth stocks.
Okta (OKTA)
Falling under the broader infrastructure software space, Okta (NASDAQ:OKTA) specializes in identity and access management. It provides secure access to applications and devices for enterprise-level clients. One element that distinguishes Okta from many other cybersecurity growth stocks is the incorporation of single sign-on, multi-factor authentication. As well, Okta offers lifecycle management.
If recent financial performances are anything to go by, Okta truly resonates with its customers. During the past four quarters, the company’s average EPS landed at almost 51 cents. In terms of earnings surprise, Okta generated a stat of 32.88%. That’s impressive. Also, while the price-to-sales (PS) ratio of 6.61X is objectively elevated compared to standard software companies, it’s relatively discounted.
In the TTM period, Okta did incur a net loss of $276 million or $1.67 per share. However, revenue hit $2.36 billion. Its most recent quarterly sales growth rate clocks in at 19.1%. For the current fiscal year, analysts anticipate 50.6% expansion in EPS to $2.41. Revenue may see a bump of 12.3% to $2.54 billion. It’s another top-tier player among cybersecurity growth stocks.
CyberArk Software (CYBR)
Another powerful enterprise within the cybersecurity realm, CyberArk Software (NASDAQ:CYBR) with its subsidiaries develops, markets and sells software-based identity security solutions and services. Its mainline product is Privileged Access Manager, which offers risk-based credential security and access. Demand should continue to rise for CYBR stock thanks to the underlying company’s advanced protection against data breaches.
On a financial note, the company has been on an impressive run. During the past four quarters, CyberArk posted an average EPS of 50.3 cents. In contrast, the average estimated EPS for this period was 21.5 cents. This translated to an earnings surprise of nearly 112%. Granted, investors will be paying a premium, with shares trading at 14.39X trailing-year revenue.
During the TTM period, CyberArk incurred a net loss of $26.01 million. However, revenue hit $811.73 million. Its most recent quarterly sales growth rate landed at 37%. For fiscal 2024, analysts believe EPS may rise by 81.3% to $2.03. On the top line, sales could swing up by 24.4% to $935.2 million. It’s easily one of the cybersecurity growth stocks.
Rapid7 (RPD)
One of the smaller but promising ideas among cybersecurity growth stocks, Rapid7 (NASDAQ:RPD) specializes in endpoint services to cloud data collection and sharing applications. It brings to the table advanced analytics and automation solutions, such as vulnerability management and incident detection and response. Thanks to its ability to identity and prioritize different threats, Rapid7 provides efficient management of the digital wilderness.
Based on the underlying financial performance, it appears that enterprise clients recognize Rapid7’s value. During the past four quarters, the company posted an average EPS of nearly 49 cents. However, the average anticipated EPS was only about 39 cents. Therefore, the earnings surprise in the period came out to 33.63%.
Even better, RPD stock can be had for only 3.47X trailing-year sales. That’s still elevated compared to the broader software sector. However, it’s a discount compared to many other cybersecurity growth stocks.
For fiscal 2024, analysts believe that the company’s EPS may rise 42.8% to hit $2.17. On the top line, sales may expand by 7.2% to $833.52 million.
Gen Digital (GEN)
Last but not least, we come to Gen Digital (NASDAQ:GEN). While the corporate name might not be familiar to people, its individual brands are. We’re talking about programs such as North, Avast, AVG and CCleaner. What makes Gen Digital distinct is the focus on individual protection. Its robust product portfolio helps everyday users protect themselves against digital threats.
To be fair, GEN stock may be the riskiest idea on this list. At the least, it requires an assumption of what the underlying company could be as opposed to what it is. For example, Gen Digital’s average EPS during the past four quarters came out to 49 cents. That’s pretty much in line with analysts’ overall expectations. The average earnings surprise was only 0.53%.
Still, GEN stock is offered at a reasonable valuation at 4.19X trailing-year sales. During the TTM period, it posted net income of $616 million or 96 cents per share. Revenue hit $3.81 billion. For the current fiscal year, analysts expect 12.2% expansion in EPS to $2.20. On the top line, sales may rise 2.6% to $3.91 billion.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
