Shares of popular cybersecurity solutions provider Fortinet, Inc. (FTNT) have gained significantly over the past year, driven by investor optimism about the growth prospects of the cybersecurity industry in the digital era. However, the company’s relatively low profitability versus its peers and stock price overvaluation make it susceptible to a pullback. FTNT’s 12.40x forward EV/Sales is 190.9% higher than the 4.26x industry average Also, the company’s 10.9% levered free cash flow margin is 63.9% below the 30.1% industry average. Wall Street analysts expect FTNT to witness an 11.3% decline in the near-term. Therefore, we think FTNT is best avoided now.
However, with the adoption of hybrid working models and large-scale digitization, the demand for cybersecurity solutions is increasing rapidly. Indeed, the global cybersecurity market size is expected to grow at a 12.5% CAGR to hit $418.30 billion by 2028.
Given this backdrop, we believe it is wise to invest in fundamentally sound cybersecurity stocks NortonLifeLock Inc. (NLOK – Get Rating), Check Point Software Technologies Ltd. (CHKP – Get Rating), and Radware Ltd. (RDWR – Get Rating). They are well-positioned to perform much better than FTNT in the near term.
NLOK in Mountain View, Calif., is a software company that provides cyber security solutions to consumers worldwide. The company’s products and services enable users to protect their devices, online privacy, identity, and home networks. NLOK sells its products and related services through retailers, telecom service providers, hardware OEMs and e-commerce platforms.
On June 29, 2021, NLOK unveiled its Norton Utilities Ultimate, a new PC performance product designed to address the challenges of slow performance, response time and internet speed caused when gaming, browsing and streaming content on Windows PCs. Norton Utilities Ultimate helps boost PC performance while also recovering lost files and protecting sensitive information. NLOK expects to gain expanded market reach with the product in the near-term.
On June 2, NLOK launched Norton Crypto, a new feature to enable consumers to safely and easily mine cryptocurrency through its trusted Norton 360 platform. As the crypto economy continues to gain popularity, Norton Crypto delivers a secure, reliable way for consumers to mine for Ethereum without opening themselves and their devices up to the pitfalls of disabling security. NLOK expects to generate high demand from coin miners in the near term.
NLOK’s net revenues for its fiscal fourth quarter, ended April 2, 2021, increased 9.4% year-over-year to $672 million. The company’s gross profit has been reported at $573 million, up 10.8% from the prior-year period. Its non-GAAP operating income came in at $342 million, which represents a 34.1% year-over-year improvement. While its non-GAAP net income increased 40.1% year-over-year to $234 million, its non-GAAP EPS increased 53.8% year-over-year to $0.40. The company had $933 million in cash and cash equivalents as of April 2, 2021.
A $0.42 consensus EPS estimate or the current quarter, ending September 30, 2021, represents a 16.2% improvement year-over-year. NLOK surpassed consensus EPS estimates in each of the trailing four quarters. The $690.23 million consensus revenue estimate for the current quarter represents a 10.2% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 14.8% rate per annum over the next five years. The stock has gained 26.3% over the past three months and closed yesterday’s trading session at $27.73.
NLOK’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality, and a B grade for Value and Growth. Click here to see the additional ratings for NLOK (Stability, Sentiment, and Momentum).
NLOK is ranked #1 of 24 stocks in the Software – Security industry.
Based in Israel, CHKP develops, markets, and supports a range of software and hardware products and services for IT security worldwide. The company offers a portfolio of network security, data and endpoint security, and management solutions, and sells them to consumers, service providers, and small- and medium-sized businesses through distributors, system integrators, original equipment manufacturers, and managed security service providers.
In early July, CHKP became a sponsor of…
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