Triple Play in Cybersecurity

10/17/2016 9:00 am EST


Marshall Hargrave

Contributing Editor, Wyatt Investment Research

The rise of cyber attacks, targeting not just social media accounts but banking and credit card data should alarm companies and individuals alike, asserts Marshall Hargrave, editor of Daily Profit.

Internet security is as important as ever; we’ve done the hard work to find the top three cybersecurity stocks to own.

FireEye (FEYE) might be the best buying opportunity in the cybersecurity business. Shares have fallen over 55% in the last year and now trading at just 3.5 times sales. FireEye may now “still” be a buyout target.

FireEye has already rebuffed a takeover during the summer, with multiple parties interested. It hired Morgan Stanley to find buyers, but FireEye was looking for at least $30 a share. FireEye's mixed financial results and inability to sell itself wreaked havoc on the company’s stock.

But it’s in a unique position to capitalize on cybersecurity concerns. The company's methods include detecting cyber attacks before they happen and quickly responding to attacks.

Palo Alto Networks (PANW) is one of the top cybersecurity stocks in the business. But Palo Alto shares have fallen close to 10% in 2016. The worry is that growth is slowing.

However, since its 2012 IPO, Palo Alto has grown its sales nicely, with top line growth of over 40% year-over-year during the latest quarter.

Palo Alto is also becoming even more shareholder-friendly. The company has announced a $500 million share buyback, a big step toward a positive change in capital allocation. The company is also undergoing a material shift toward subscription revenues.

Cyberark (CYBR) is a maker of cybersecurity software, focusing on the health-care and retail industries. It has seen its stock fall 6% in the last year, but it’s one of the few cybersecurity stocks that makes money.

Cyberark has a solid 11% return on invested capital and generates over $40 million a year in earnings. What’s more, Cyberark is expected to grow earnings by 20% in 2017.

And of course, as a $1.7 billion market-cap company, Cyberark could easily be bought by a larger company looking to gain a leg up in the cybersecurity market.

In the end, cybersecurity will continue to be an important issue for companies, consumers and investors. There are a few unique ways to play this, and the three stocks above are great places to start.

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By Marshall Hargrave, Editor of Daily Profit

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