The increasing number of illegal events, terrorism, and fraudulent activities across the globe and stringent government norms have led to a rise in the adoption of security systems. Therefore, investors could consider buying cybersecurity stocks, such as CyberArk Software Ltd. (CYBR), Fortinet, Inc. (FTNT), and Tenable Holdings, Inc. (TENB).
The increasing amount of data generated and the rising complexity of technologies have led organizations to rely more heavily on cloud services for their operations and data management. This surge in cloud service adoption drives the demand for cloud security solutions.
Moreover, the increasing complexity of cyber risks and the need to protect sensitive data are pushing organizations to invest in robust cloud security solutions, making it an essential component of modern digital infrastructure. Therefore, the global cloud security software market is expected to grow at a CAGR of 17.4% by 2033.
Considering the industry’s conducive trends, let’s examine the fundamentals of the three Software - Security stock picks, beginning with the third choice.
Stock #3: CyberArk Software Ltd. (CYBR)
CYBR develops, markets, and sells software-based identity security solutions and services in the United States, Europe, the Middle East, Africa, and internationally.
On January 30, 2025, CYBR introduced Identity Bridge, an endpoint identity security capability supporting identity and privilege sprawl reduction on Linux machines. Identity Bridge would enable organizations to authenticate to Linux systems using centralized accounts, minimizing dependence on outdated authentication methods.
On January 15, 2025, CYBR announced a new integration between CyberArk Privileged Access Manager (PAM) and Microsoft Defender for Identity, giving organizations a unified, comprehensive view of their entire identity security landscape to allow quicker, more effective threat response and containment.
In terms of the trailing-12-month gross profit margin, CYBR’s 81.07% is 61.5% higher than the 50.19% industry average.
CYBR’s total revenue for the fiscal third quarter ended September 30, 2024, increased 25.6% year-over-year to $240.10 million. Its non-GAAP gross profit was $200.33 million, up 26.7% year-over-year. Additionally, its non-GAAP net income and net income per share were $45.14 million and $0.94, respectively, reflecting 130.2% and 123.8% increases compared to the prior-year quarter.
Street expects CYBR’s revenue for the quarter ended December 31, 2024, to increase 35.1% year-over-year to $301.47 million. Its EPS for the quarter ending March 31, 2025, is expected to grow 2.6% year-over-year to $0.77. It surpassed the consensus EPS estimates in each of the trailing four quarters.
CYBR’s stock has gained 59% over the past year to close the last trading session at $370.98.
CYBR’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It is ranked #9 out of 20 stocks in the Software - Security industry. It has an A grade for Growth and a B for Sentiment and Quality. In addition to the POWR Ratings grades I’ve just highlighted, you can see CYBR’s ratings for Value, Stability, and Momentum here.
Stock #2: Fortinet, Inc. (FTNT)
FTNT provides cybersecurity and converged networking and security solutions worldwide. It offers secure networking solutions focused on integrating networking and security, including network firewall solutions, FortiGate data center, hyperscale, distributed firewalls, encrypted applications, wireless LAN solutions, and secure connectivity solutions.
On December 3, 2024, FTNT launched FortiAppSec Cloud, a unified web app security and performance platform. It integrates API protection, bot defense, and load balancing, streamlining security and management for hybrid and multi-cloud environments.
In terms of the trailing-12-month Return on Common Equity margin, FTNT’s 311.53% is significantly higher than the 4.60% industry average. Similarly, its 28.86% trailing-12-month levered FCF margin is 151% higher than the 11.50% industry average. Additionally, its 26.79% trailing-12-month net income margin is 556.1% higher than the 4.08% industry average.
For the third quarter ended September 30, 2024, FTNT’s total revenue increased 13% year-over-year to $1.51 billion. Its non-GAAP operating income rose 46.7% from the year-ago value to $544.70 million. During the same period, the company’s non-GAAP net income and non-GAAP net income per share grew 50.7% and 53.7% to $487.60 million and $0.63, respectively.
Analysts expect FTNT’s EPS and revenue for the quarter ended December 31, 2024, to increase 19.1% and 12.8% year-over-year to $0.61 and $1.60 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 73.8% to close the last trading session at $100.88.
FTNT has an overall B rating, equating to a Buy in our proprietary rating system. FTNT has an A grade for Quality and a B for Sentiment.
It is ranked #6 in the same industry. To see FTNT’s Growth, Stability, Value, and Momentum rating, click here.
Stock #1: Tenable Holdings, Inc. (TENB)
TENB provides cyber exposure solutions in the Americas, Europe, the Middle East, Africa, the Asia Pacific, and Japan. The company also offers Nessus, a vulnerability assessment solution for the cybersecurity industry and enterprise platform, and Nessus Expert, which enables users to programmatically detect cloud infrastructure misconfigurations and vulnerabilities in the design and build phase.
On December 4, TENB released Tenable Patch Management, an autonomous patch solution built to quickly and effectively close vulnerability exposures in a unified solution. Created with a strategic partnership and integration with Adaptiva, the solution addresses the critical challenges of vulnerability remediation.
It shortens the time from discovery to remediation by examining the most impactful vulnerabilities across different environments. It also offers features like autonomous patching, which streamlines discovery to remediation, and customizable controls that prevent problematic updates.
TENB’s trailing-12-month gross profit margin of 77.55% is 53.6% higher than the 50.50% industry average. Its trailing-12-month levered FCF margin of 21.70% is 88.7% higher than the industry average of 11.50%.
During the third quarter that ended September 30, 2024, TENB’s revenue increased 12.7% year-over-year to $227.09 million. Its non-GAAP gross profit was $184.82 million, up 14.2% year-over-year. Also, the company’s non-GAAP income from operations rose 23% from the prior-year quarter to $44.98 million.
Furthermore, the company’s non-GAAP net income and non-GAAP EPS of $39.32 million and $0.32 reflects growth of 42.1% and 39.1% from the prior year’s quarter, respectively.
For the fourth quarter ended December 2024, analysts expect TENB’s revenue to increase 8.8% year-over-year to $232.02 million. For the same quarter, the company’s EPS is expected to grow 37.8% year-over-year to $0.34. Moreover, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters.
Shares of TENB have gained 9.4% over the past month to close the last trading session at $43.09.
TENB’s bright prospects are apparent in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
TENB has an A grade for Growth. It is ranked #5 in the same industry.
Beyond what is stated above, we’ve also rated TENB for Momentum, Stability, Sentiment, Value, and Quality. Get all TENB ratings here.
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FTNT shares were trading at $100.78 per share on Monday afternoon, down $0.10 (-0.10%). Year-to-date, FTNT has gained 6.67%, versus a 2.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
3 Cybersecurity Stocks Guarding the Digital Economy From Threats StockNews.com
