With the world becoming increasingly tense, there may be no better time than now to consider adding the best cybersecurity stocks to buy to your portfolio. Primarily, amid the backdrop of Russia’s invasion of Ukraine, western powers are careening toward major direct conflicts with belligerent state actors. As a result, both government agencies and commercial enterprises must bolster their online security.
According to the Council on Foreign Relations, the thinktank has identified 34 separate countries that deploy state-backed cyber operations. While Russia weighs heavily in terms of potential threats, it’s not the only power to worry about. Nations like China, Iran and North Korea aren’t exactly friendly to the U.S., thus cynically bolstering the narrative for the best cybersecurity stocks to buy.
Moreover, regardless of threats from unscrupulous governments, data breaches have long been a sour spot since the advent of digitalization. In 2020, the average cost of a data breach amounted to $8.64 million. Further, the U.S. saw an increase in attacks from the prior year, moving against worldwide trends.
Put another way, the best cybersecurity stocks to buy feature a very relevant profile, particularly for the U.S. economy.
|PANW||Palo Alto Networks||$515.69|
CACI International (CACI)
One of the biggest names in the information technology sector, CACI International (NYSE:CACI) specializes in network security. According to Fortune Business Insights, the network security segment’s valuation alone is expected to rise to $53.11 billion by 2029, representing a compound annual growth rate (CAGR) of 13% from 2022.
In particular, CACI has the advantage of providing services for both U.S. government agencies and major blue chips. While you might not get a great deal from CACI on paper — it’s considered fairly valued against a basket of valuation gauges — the company does enjoy strong profitability metrics. For instance, its operating margin of nearly 8% exceeds the industry median of 3% quite significantly.
So far this year, CACI is up 6% in the market, making it one of the best cybersecurity stocks to buy in terms of comparative stability. As well, it’s been steadily gaining over the past five years, up 123%.
A10 Networks (ATEN)
Founded in 2004, A10 Networks (NYSE:ATEN) specializes in in the manufacturing of application delivery controllers. According to Mordor Intelligence, the application delivery controller market is expected to reach a valuation of $3.78 billion by 2026, representing a CAGR of 9.63% from 2021.
One of the most important companies among the best cybersecurity stocks to buy, A10 leverages the artificial intelligence protocols to provide automated protection against distributed denial-of-service (DDoS) attacks. Further, per its website, 57% of A10 customers report improved security, with 43% reporting reduced costs.
Financially, the cybersecurity firm features tremendous strengths in its balance sheet, particularly its cash-to-debt ratio of 42.2, well above the industry median of 3.7. To be fair, valuation metrics consider ATEN overvalued at the moment. However, at 15% down on a year-to-date basis, ATEN could be a discounted player, especially as cyber threats will likely only rise as a problematic issue.
Palo Alto Networks (PANW)
One of the most recognized names among the best cybersecurity stocks to buy, Palo Alto Networks (NASDAQ:PANW) provides firewalls that manage applications and help prevent data leaks. As you can imagine, Palo Alto enjoys a massive total addressable market in just one subsector.
According to Research and Markets, the global network security market size reached a valuation of $4.68 billion in 2021. Experts project that by 2027, the segment will command a valuation of $16.6 billion, representing a CAGR of 23.5% from 2023 estimates.
What’s more, Palo Alto has exceptional acumen across addressing various other cyber vulnerabilities, including solutions for software as a service (SaaS) platforms and internet of things (IoT) networks. Admittedly, though, for this relevance, investors are paying a bit of a premium, especially as the company’s financial and profitability strengths are middle of the road.
Nevertheless, PANW is a powerhouse in the industry. Down about 7% YTD, it might be a solid name to add to your portfolio.
Another one of the big players among the best cybersecurity stocks to buy, Fortinet (NASDAQ:FTNT) specializes in network security appliances. In addition, Fortinet offers managed intrusion prevention systems, which is a compelling subsegment within the broader cybersecurity space.
According to a report from For Markets, “the global intrusion detection and prevention systems market is expected to grow from USD 4.57 billion in 2020 and to reach USD 9.04 billion by 2028, growing at a CAGR of 8.89% during the forecast period 2021-2028.”
An intriguing catalyst for Fortinet is the company’s myriad financial strengths. The company features a solid balance sheet along with robust profitability metrics. A key highlight is Fortinet’s nearly 18% net margin, which is up from its median metric of 10% during the past 10 years. As well, it beats out the cybersecurity industry’s median net margin of 2.3%.
To be fair, the robust attributes come at a cost of FTNT being considered modestly overvalued. However, based on a long-term technical profile, it appears that FTNT is setting up a bullish flag formation. If so, this configuration implies significant upside ahead.
Utilizing a SaaS model, Qualys (NASDAQ:QLYS) provides vulnerability management solutions. Qualys is especially vital for organizations that utilize hybrid IT networks, whether that be on-premises, endpoints, cloud computing, mobile or other interfaces. The company identifies all known and unknown assets in these networks, providing comprehensive security against myriad cyberthreats.
As with some of the other candidates for best cybersecurity stocks, Qualys distinguishes itself with exceptional strengths. On the balance sheet, the company features a cash-to-debt ratio of 10.1, well above the industry median of 3.7. Moving to the income statement, Qualys enjoys outstanding profitability ratios. For example, its net margin is 22.5%, beating out the sector median of 2.3%.
Interestingly, against a basket of valuation gauges, QLYS is fairly valued. Moreover, shares have been steadily moving higher over the trailing five years. Therefore, for investors that prefer relative reliability in their market ideas, QLYS could be one of the best cybersecurity stocks to buy this month.
Absolute Software (ABST)
Specializing in threat deterrence and data recovery services, Absolute Software (NASDAQ:ABST) is an enticing idea for those who wish to ramp up the risk-reward profile for the best cybersecurity stocks to buy. According to ReportLinker, the global data recovery software market reached a valuation of $14.8 billion in 2021.
Now, experts call for the segment to hit slightly over $16 billion in 2022. From there, the market could expand at a CAGR of 8.59% to reach $24.3 billion by 2027. With a market capitalization of $458 million, Absolute Software has a tremendously large total addressable market.
To be completely transparent, Absolute leaves something to be desired financially. Its balance sheet isn’t the greatest in the world, although its profitability metrics are decent. Based on common valuation gauges, ABST might be a value trap.
While speculative, ABST appears to be charting a series of higher lows since the spring doldrums of 2020. Therefore, trader may enjoy higher-than-normal rewards should the gamble pay off.
An identity and access management firm, Okta (NASDAQ:OKTA) represents a vital cog in the digital economy. While connectivity platforms have enabled tremendous conveniences and flexibility, they’re also prone to vulnerabilities. Therefore, despite OKTA’s substantial losses this year — down 54% — speculators might be eyeballing an entry point.
Indeed, Okta, like many other candidates for best cybersecurity stocks to buy, enjoys a sizable total addressable market. According to Fortune Business Insights, the global identity and access management sector is “projected to grow from USD 13.41 billion in 2021 to USD 34.52 billion in 2028 at a CAGR of 14.5 % in the 2021-2028 period.”
Now, I want to be clear that OKTA may be one of the best cybersecurity stocks to buy for speculation. Its financial strengths and profitability metrics are middling. Further, GuruFocus warns that OKTA may be a value trap. However, the counterargument is the relevance of the identity and access management market, which is only projected to rise higher.
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.