3 Cybersecurity Stocks to Buy on the Pullback

Tech stocks rebound. Within the sector, cybersecurity stocks offer the best combination of growth and value, especially as the sector grows in importance every day. Read on to find out why investors should consider buying top cybersecurity stocks like Fortinet (FTNT), Qualys (QLYS), and OneSpan (OSPN).

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After more than a year and a half of a brutal bear market, tech stocks are finally getting a bid. Since mid-June lows, the Nasdaq 100 (QQQ) is up 17.4%. Some of the factors behind the recovery are a dampening of extreme bearish sentiment, the Fed’s “moderate hike” and a better-than-expected second-quarter earnings season.

To be clear, the economy and the stock market continue to face significant challenges. However, tech stocks are very likely to move lower before the broader market, just as they outperformed well before the Dow Jones Industrial Average and the S&P 500. Within the tech sector, investors should watch cybersecurity stocks, especially as these companies continue to grow profits while their total addressable market (TAM) continues to expand at a healthy rate.

In addition, cybersecurity continues to grow in importance. It is a necessity for all businesses to secure their cloud infrastructure and IT stack, which are increasingly integral to daily operations. It is also an area of ‚Äč‚Äčnational security importance, as cyberspace is another frontier over which countries fight. Given the bear market for stocks and the improving outlook for cybersecurity stocks, investors should consider buying.

which ones (QLYS)

QLYS is a pioneering and leading provider of cloud-based IT, security and compliance solutions. The company offers Qualys Cloud Apps, Threat Protection, Continuous Monitoring, Multi-Vector Endpoint Detection and Response, and Web Application Scanning, among other solutions. Its clients include corporations, government entities, and small and medium-sized businesses in a variety of industries.

QLYS has been an impressive outperformer, falling just 10% in the previous year and up 19.8% over the past year. The main factor is that, unlike so many other tech and cloud-based stocks, it has continued to see impressive growth in terms of earnings and free cash flow. In addition, the need for security when it comes to cloud-based applications continues to grow at a faster rate than other markets, and QLYS is one of the leading companies in this space.

In its most recent quarter, QLYS had 17% revenue growth and a 27% increase in operating income. Next quarter, analysts expect this pace of growth to continue with an 18% increase in revenue and a 31% increase in operating income.

From a more qualitative sense, QLYS offers investors the opportunity to buy leading cloud security companies at a very reasonable valuation. QLYS’ strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. QLYS has an A quality rating due to its industry leading status.

Within the software – security industry, it ranks #5 out of 29 stocks. Click here to see additional POWR rankings for QLYS.

Fortinet (FTNT)

FTNT is a provider of network and cyber security solutions and services. Its customers include enterprises, communication service providers, government organizations and small businesses.

It is a leading provider of firewall services and VPN services. Its main product is FortiOS, which is a network operating system for managing network security devices. Its cloud security offerings are available for deployment in public and private cloud environments and include application security.

Like QLYS, FTNT has been a relative outperformer with a 9% gain over the past year. While most tech stocks have been mired in a brutal bear market, FTNT has been consolidating in a tight range, indicating that institutions are using adverse market conditions to stockpile shares.

Over the past year, FTNT’s revenue has increased by 34% to $954.80 million. Most impressively, their income is accelerating. Next quarter, analysts expect revenue growth of 35% and EPS growth of 39%.

Given these solid fundamentals and track record, it’s no surprise that FTNT is rated B by POWR Ratings, which translates to a buy. B-rated stocks have posted an average annual return of 21.1%, which compares favorably with the S&P 500’s average annual growth of 8.0%. Click here to see more of the FTNT POWR rankings.

OneSpan (OSPN)

OSPN is a provider of digital solutions for business identification, security and productivity. Some of its best-known products are OneSpan Sign, which captures and processes a series of electronic signatures for transactions, OneSpan Cloud Authentication, a cloud-based multi-factor authentication solution, and OneSpan Identity Verification, which enables identity verification services for banks and financial institutions.

Compared to its peers, OSPN has underperformed with a 35% year-over-year decline. However, the company is well positioned in a growing market. For the full year, OSPN expects adjusted EBITDA between $5 million and $7 million. It also sees annual recurring revenue growth of 16% to 18%.

9″MUST BE OWNED“Growth Stocks

what makes them”MUST BE OWNED“?

All 9 selections have solid foundations and are experiencing great momentum. They also contain a winning combination of growth and value attributes that creates a catalyst for serious outperformance.

Even more importantly, each recently earned a Buy rating from our coveted POWR rating system, where the A-rated stock has gained +31.10% year-to-date.

Click below to see these top-performing stocks with exciting growth prospects:

9″MUST BE OWNED“Growth Stocks

The stock’s decline and continued growth have made it intriguing from a valuation perspective. For example, it has a market capitalization of $445 million and total cash of $120 million. It also has a price-to-sales of 2 with gross margins of 67%, which is an indicator of future profitability if revenue growth continues.

OSPN has an overall rating of B, which is equivalent to a buy rating in our proprietary POWR rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

OSPN also has strong component ratings, including a B for quality and value. It is also the second company in the software industry – security of 29 shares. Click here to see the full OSPN POWR rankings.

Shares of QLYS closed Friday at $122.32, up $0.20 (+0.16%). Year-to-date, QLYS is down -10.86%, versus a -12.61% increase in the benchmark S&P 500 over the same period.

About the Author: Jaimini Desai

Jaimini Desai has been a financial writer and reporter for nearly a decade. Its goal is to help readers identify risks and opportunities in the markets. He is the chief growth strategist at StockNews.com and the publisher of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles.


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