While the cybersecurity market is projected to grow at a rapid rate in the future, there are several cybersecurity firms – such as Palo Alto Networks (PANW, Financial), FireEye (FEYE, Financial), etc. – that are still struggling to find their ways into the green. CyberArk Software (CYBR, Financial) looks like a good investment option that investors should have on their radars.
Since its IPO, CyberArk has successfully managed to beat analysts' estimates in terms of earnings as well as revenue. Throughout the past year, the company’s top line surged at an average of 32% on a yearly basis. Despite showing healthy performance, the stock was up just 1% in 2016, but the stock has shown a strong upward momentum heading into 2017.
Moving ahead, CyberArk reported its fourth-quarter results on Thursday. In fourth-quarter fiscal 2016, the company shared earnings per share of 41 cents, exceeding the analysts' estimate by 8 cents. The company’s revenue came in at $64.40 million, beating the analysts' estimate by $1.39 million which represents a whopping surge of 25% year over year.
CyberArk currently holds a leading position in the privileged account management (PAM)Â market. The company’s platform safeguards large firms from internal threats, such as aggrieved workers or by locking down the infected systems before they affect the entire network.
The most significant thing to notice is that the company does not face fierce competition in the PAM market as a majority of cybersecurity companies place their emphasis on external threats with next generation firewalls and threat detection systems.
According to a report from scmagazine.com published in September 2015, internal threats were responsible for 43% of overall data breaches and that figure is projected to rise in the future. To gain benefits from rising internal threats and substantially expand its sales force, the company is boosting its R&D expenses to fortify its product arsenal.
CyberArk has over 3,075 customers, a surge of 575 customers compared to that in fiscal 2015. The company detailed that nearly 50% of the Fortune 100 and more than 25% of the Global 2000 are using its services to help safeguard their most valuable assets.
Apart from this, the company is reinforcing its associations with the providers of subsidiary cybersecurity solutions like Intel Security as well as FireEye.
Conclusion
Throughout the past few quarters, the company has displayed remarkable top-line growth. The stock was almost flat in 2016 mainly due to the concerns regarding its slowing sales growth and weak enterprise expenditure. Most significantly, the stock currently trades at a price-earnings (P/E) ratio of 70.94, which makes it highly overvalued.
The number of data breaches around the globe is projected to rise in the coming years which could act as a key driver of the company’s revenue as well as earnings growth. As an outcome, CyberArk looks like a striking acquisition target for a giant security company, but investors should wait for the right time to initiate a position in the stock. It is already up almost 22% year to date.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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