The cybersecurity sector is vital for upholding the security and integrity of our digital landscape. With escalating threats, it is crucial to invest in cybersecurity measures to defend against cyber-attacks.
Given this backdrop, investors could consider adding cybersecurity stocks Check Point Software Technologies Ltd. (CHKP), OneSpan Inc. (OSPN), and Tenable Holdings, Inc. (TENB) to their watchlist.
The global cybersecurity industry plays a crucial role in safeguarding individuals, organizations, and governments from cyber threats, which are increasing in frequency and sophistication. As our world becomes more interconnected thanks to the internet, the risk of cyberattacks has also risen, making cybersecurity more important than ever before.
Cybersecurity companies help prevent cyberattacks and safeguard against financial losses, reputational damage, and data breaches. The increasing reliance on cloud services has led to a higher demand for security solutions to protect sensitive information and infrastructure from evolving cyber threats.
With the increasing demand for software solutions for protection against threats, Gartner predicts global end-user spending on security and risk management is projected to increase by 14.3% from 2023 to reach $215 billion in 2024.
Software companies constantly innovate and collaborate with others to stay ahead of evolving cybercriminal tactics, coupled with ongoing investment in research and development. These measures by the companies have bolstered the cybersecurity industry substantially. The global cyber security market is projected to hit $424.97 billion by 2030, at a CAGR of 13.8%.
Considering these factors, let’s examine the fundamentals of the Software - Security stock picks, beginning with the third choice.
Stock #3: Check Point Software Technologies Ltd. (CHKP)
Headquartered in Tel Aviv, Israel, CHKP develops, markets, and supports a range of products and services for IT security worldwide. The company offers a multilevel security architecture, cloud, network, mobile devices, endpoint information, and IOT solutions.
On June 11, 2024, CHKP announced CloudGuard WAF-as-a-Service, an automated, AI-powered web application firewall that offers organizations a solution to prevent cyber threats and protect web applications from unauthorized access and data breaches. Prioritizing prevention, simplicity, and scalability, it delivers an easy and cost-effective way to efficiently secure cloud applications and APIs.
On May 22, 2024, CHKP reinforced its Web Application Firewall with the powerful API Discovery feature aimed at strengthening organizations’ cloud assets. This innovative tool, combined with its cloud-native prevention first capabilities, positions CHKP as a leading performer in GigaOm's latest Radar for Application and API Security.
CHKP’s trailing-12-month net income margin of 34.33% is considerably higher than the industry average of 2.81%. Likewise, its trailing-12-month Return on Common Equity and Return on Total Assets of 29.80% and 15.26% are 636.9% and 860% higher than the industry averages of 4.04% and 1.59%, respectively.
For the fiscal first quarter that ended March 31, 2024, CHKP’s total revenues and non-GAAP operating income stood at $598.80 million and $252 million, up 5.8% and 5.7% year-over-year, respectively. For the same quarter, its non-GAAP net income and earnings per share increased 7.6% and 13.3% from the prior-year quarter to $234.50 million and $2.04, respectively.
Street expects CHKP’s EPS and revenue for the quarter ending June 30, 2024, to increase 8% and 5.9% year-over-year to $2.16 and $623.38 million, respectively. The company surpassed consensus EPS estimates in each of the trailing four quarters, which is impressive. CHKP has gained 23.7% over the past year, closing the last trading session at $155.98.
CHKP’s POWR Ratings reflect this positive outlook. It has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
CHKP has an A grade for Quality. It is ranked #7 out of 23 stocks in the B-rated Software - Security industry. Click here to see CHKP’s Growth, Value, Momentum, Stability, and Sentiment ratings.
Stock #2: OneSpan Inc. (OSPN)
OSPN designs, develops, and markets digital solutions for identity, authentication, and secure digital agreements worldwide. The company offers OneSpan Sign, OneSpan Cloud Authentication, and OneSpan Identity Verification.
On June 11, 2024, OSPN announced the launch of the OneSpan Integration Platform. This platform enables organizations to effortlessly integrate eSignatures into well-known applications, ensuring that sending, signing, and storing transactions is seamless and more efficient.
OSPN’s trailing-12-month asset turnover ratio of 0.82x is 32.2% higher than the industry average of 0.62x. Similarly, its trailing-12-month gross profit margin of 68.43% is 38.1% higher than the industry average of 49.54%.
OSPN’s total revenue for the fiscal first quarter that ended March 31, 2024, amounted to $64.84 million, up 12.6% year-over-year. Its gross profit rose 20.6% from the prior-year quarter to $47.40 million. The company’s non-GAAP net income stood at $16.69 million and $0.43 per share, respectively, compared to a non-GAAP net loss of $3.69 million and $0.09 per share in the year-ago quarter.
For the quarter ending September 30, 2024, OSPN’s revenue is expected to increase marginally year-over-year to $59.05 million. Its EPS for the same quarter is expected to rise 137% year-over-year to $0.21. It surpassed consensus revenue and EPS estimates in three of the trailing four quarters. The stock has gained 16.6% year-to-date to close the last trading session at $12.50.
OSPN’s strong fundamentals are reflected in its POWR Ratings. Its overall rating is B, equating to Buy in our proprietary rating system.
It has a B grade for Growth and Value. It is ranked #6 in the same industry. Get OSPN’s Momentum, Stability, Sentiment, and Quality ratings here.
Stock #1: Tenable Holdings, Inc. (TENB)
TENB provides cyber exposure solutions internationally. Its platforms include Tenable Vulnerability Management, Tenable Cloud Security, Tenable Identity Exposure, Tenable Web App Scanning, Tenable Lumin Exposure View, Tenable Attack Surface Management, Tenable Security Center, and Tenable OT Security.
On June 6, 2024, TENB announced that it signed a definitive agreement to acquire Eureka Security, Inc., which helps security teams gain a holistic view into an organization’s cloud data security footprint, fight policy drift and misconfigurations that put data at risk, and continuously improve their security posture over time. The acquisition is expected to close this month.
On June 5, 2024, TENB announced that it formed a strategic alliance with Deloitte, adding the Tenable One Exposure Management Platform, Tenable Cloud Security, and Tenable OT Security to its portfolio of available cyber solutions for the Internet of Things and operational technology cyber risk management.
TENB’s trailing-12-month gross profit margin and levered FCF margin of 77.36% and 20.74% are 56.2% and 108.3% higher than the industry averages of 49.54% and 9.96%, respectively.
For the fiscal first quarter that ended March 31, 2024, TENB’s revenue increased 14.4% year-over-year to $215.96 million. Its non-GAAP gross profit rose 17.2% from the prior-year quarter to $174.68 million. In addition, its non-GAAP net income stood at $30.44 million, up 133% from the year-ago quarter. Also, its non-GAAP earnings per share grew 127.3% year-over-year to $0.25.
Analysts expect TENB’s EPS and revenue for the quarter ending June 30, 2024, to increase 6.9% and 12.1% year-over-year to $0.24 and $218.53 million, respectively. The company surpassed Street EPS and revenue estimates in each of the trailing four quarters. The stock has gained marginally intraday, closing the last trading session at $40.52.
TENB’s POWR Ratings reflect its robust prospects. It has an overall B rating, equating to Buy in our proprietary rating system.
TENB has an A grade for Growth and a B for Sentiment and Quality. Within the Software - Security industry, it is ranked #5. Click here for the additional POWR Ratings of TENB (Value, Momentum, and Stability).
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CHKP shares were trading at $154.71 per share on Tuesday afternoon, down $1.27 (-0.81%). Year-to-date, CHKP has gained 1.26%, versus a 14.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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