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According to Cybersecurity Ventures, global cybercrime damage costs are expected to grow by 15% per year over the next three years yet 65% of small to medium businesses don’t think they are cyberattack targets, as noted in an OpenText 2023 Cybersecurity Global Ransomware Survey but once they realize they are putting their companies at grave risk, cybersecurity stocks will have even more room to run making them great long-term buys.CrowdStrike Holdings (CRWD) is one such company that serves the cybersecurity market and its focus on cloud-native solutions and AI-driven threat detection has positioned it as a leader in endpoint security – the practice of securing entry points of end-user devices such as desktops, laptops, and mobile devices from being exploited by malicious actors and campaigns. An excellent article by GuruFocus Research (see here) highlights the strengths, weakness, opportunities and threats related to CRWD and it is referenced here along with my comparative analysis of CRWD’s valuation metrics and those of two (2) of it competitors, Zscaler Inc. (ZS) and Palo Alto Networks (PANW) and reference to four (4) of its other competitors, namely, SentinelOne (S), Fortinet (FTNT), Check Point Software Technologies (CHKP) and Rapid7 Inc. (RPD). .
GuruFocus Research points out that CRWD’s recent Q3 (see here) financial results show that:
The above financial highlights underscore CRWD’s solid performance and potential for future growth reflected in its forward PEG ratio (see below) which is better than the sector median.
GuruFocus Research identifies three (3) weaknesses which, if not adequately addressed, could impede CRWD’s future operations, namely:
With strengths and weaknesses come opportunities and GuruFocus Research identifies three (3) opportunities below that CRWD could realize to strengthen its market position:
With opportunities come threats to CRWD’s business and, again, GuruFocus Research identifies three (3) that CRWD must meet and overcome if it is to prosper in the cybersecurity sector, namely:
In addition to the above comments I provide below an analysis of CRWD’s valuation metrics and compare them with those of its primary competition, Zscaler (ZS) and Palo Alta Networks (PANW).
CrowdStrike, with a market capitalization of $56B, is UP 128% YTD as of mid-day, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
(Please note that the metrics – see definitions at end of article – change daily with the change in SMCI’s stock price.)
How does CrowdStrike compare with its major competitors? Let’s take a look at the valuation metrics of:Zscaler (ZS): Mkt. Cap. of $29.6B; UP 78.7% YTD
Palo Alto Networks (PANW): Mkt. Cap. of $91.1B; UP 112.7% YTD
On the basis of the above valuation metrics CrowdStrike has the best forward PEG ratio of 1.8x followed closely by Zscaler at 1.9x and then Palto Alto Networks at 2.4x. That being so noted, Palto Alto Networks has by far the best forward EV/EBITDA ratio at 37.3x compared to 66.6x for Zscaler and 70.0x for CrowdStrike. To complete your analysis of the cybersecurity sector check out SentinelOne (S), Fortinet (FTNT), Check Point Software Technologies (CHKP) and Rapid7 Inc. (RPD).
Valuation Metric Definitions
To evaluate the above companies look at the key valuation ratios referred to above and defined below:
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