Cybersecurity executives are embroiled in a confrontation. During a sequence of current convention calls, and in subsequent follow-ups on Twitter/X, the CEOs of Palo Alto Networks (PANW -2.19%) and CrowdStrike Holdings (CRWD -2.07%) spoke out about their opponents, together with one another. Attacked one other firm. CrowdStrike CEO George Kurtz even talked about Palo Alto by identify in ready remarks. This is even if the 2 giants don’t straight compete of their core companies of community safety (Palo Alto) and endpoint safety (CrowdStrike).
Meanwhile, small companies are attaining strong, worthwhile progress behind the scenes. One such cybersecurity supplier is his Qualys (QLYS 0.45%), which has simply reported constant monetary outcomes as soon as once more. Despite the current decline, the inventory value has doubled up to now 5 years. Here’s what buyers must learn about his Qualys in 2024 and past.
Attractive cybersecurity shares
Qualys supplies a set of cloud-based software program instruments to assist organizations with safety compliance. Scans for safety vulnerabilities and suggests fixes for any weaknesses discovered. As IT infrastructures turn into extra complicated with a mixture of conventional inside networks and public clouds, the variety of gadgets and apps that giant enterprises want to trace and preserve safe is quickly growing. The Qualys platform performs a vital position in your organization’s cybersecurity efforts.
Qualys is not the fastest-growing cyber specialist within the trade, however its common income progress since 2020 has been within the low to mid-10s. It’s a small firm with solely $555 million in income in 2023 (in comparison with the corporate’s billions in annual gross sales). (The largest pure cybersecurity initiative). And whereas many safety software program platform suppliers battle with profitability, Qualys really gives buyers a lovely proposition with strong GAAP internet earnings and free money stream (FCF) era regardless of its dimension. offered to you. His FCF return final yr was a powerful 42.5%, making him one of many highest money mills amongst its peer group.
Data by YCharts.
Qualis is channeling the vast majority of this FCF into share buybacks, returning $171 million and $317 million to shareholders in 2023 and 2022, respectively. The firm’s steadiness sheet is strong with $426 million in money and short-term investments, and no debt.
Qualys expects income to develop between 8% and 10% in 2024, based mostly on administration’s present outlook. Again, you will not discover a progress report right here, however when mixed with its profitability and wholesome steadiness sheet, there may very well be loads to love about Qualys for the proper investor.
Will competitors destroy Qualis?
As a extremely worthwhile firm, Qualys inventory is a uncommon worth play within the high-growth however normally costly cybersecurity market. Qualys’ inventory at the moment trades at 42 instances its trailing 12-month earnings per share (EPS) and 27 instances his trailing-12-month FCF.
But a number of the maneuvering between Palo Alto and CrowdStrike may really damage smaller firms like Qualis probably the most. The two cybersecurity giants are additionally increasing into ancillary areas. This contains compliance and knowledge safety posture administration (DSPM), the very area of interest Qualys, and different smaller friends like Tenable.
Both Palo Alto and CrowdStrike have acquired DSPM in current months to develop their very own platforms and increase their safety software program market share (Palo Alto acquired Dig and Flow Security and bought CrowdStrike). (I simply introduced my participation).
This yr’s Qualys is certainly price watching. The firm remains to be placing up respectable numbers and clearly supplies a beneficial service that many organizations want proper now. However, as a consequence of elevated competitors, the inventory nonetheless appears slightly costly to me for the time being, even in relative worth in comparison with its bigger friends. Still, I’m sufficient to regulate this small enterprise as 2024 progresses and the cybersecurity wars intensify.
Nicholas Rossolillo and his purchasers have positions at CrowdStrike and Palo Alto Networks. The Motley Fool has positions in and recommends CrowdStrike, Palo Alto Networks, and Qualys. The Motley Fool has a disclosure coverage.