The Best Cybersecurity Stock to Buy Now? | OKTA vs. CRWD vs. PANW vs. FTNT vs. S

Summary

In this video, the speaker compares five leading cybersecurity stocks: Sentinel 1, PaloAlto Networks, CrowdStrike, Forinet, and Octa, focusing on their revenue growth, returns on invested capital, and valuations. The analysis highlights Octa as the top pick for long-term investors, due to its consistent growth, improving profitability, and undervaluation compared to its peers. While CrowdStrike appears overvalued, Octa offers strong growth potential with a lower forward price-to-earnings ratio and solid returns. The speaker concludes that Octa is the best cybersecurity stock to buy right now for investors looking to capitalize on the industry’s potential.

Takeaways

• 😀 The cybersecurity industry is attractive to investors due to competitive dynamics, increased regulatory scrutiny, and the growing need for stronger cybersecurity measures in publicly traded companies.
• 😀 The five cybersecurity stocks being compared are Sentinel 1, Palo Alto Networks, CrowdStrike, Fortinet, and Okta.
• 😀 Palo Alto Networks is the leader in total revenue with $8.9 billion in the most recent trailing 12-month period, followed by Fortinet at $6.1 billion.
• 😀 Sentinel 1 shows the highest compounded annual revenue growth (74.5%) between 2019 and 2025, followed by CrowdStrike at 51%.
• 😀 Fortinet demonstrates the best return on invested capital (23%) and has shown positive growth since 2021.
• 😀 Okta showed significant improvement in return on invested capital, rising from negative 7% in 2021 to positive 0.2% in the latest period.
• 😀 Sentinel 1, despite showing the worst return on invested capital, has been improving over time with impressive revenue growth.
• 😀 CrowdStrike experienced a decline in its return on invested capital, partially due to a major outage that caused financial headwinds.
• 😀 Palo Alto Networks' margins have been impacted by a strategic shift offering services without immediate revenue, though this is expected to improve over time.
• 😀 When evaluating stock valuations, CrowdStrike is the most expensive with a forward P/E ratio of 123, while Okta is the cheapest at a P/E of 28.
• 😀 According to a proprietary discounted cash flow (DCF) model, Okta and Sentinel 1 appear undervalued, while CrowdStrike and Palo Alto Networks seem overvalued.
• 😀 Based on the analysis, Okta is recommended as the best cybersecurity stock to buy due to its consistent revenue growth, improving return on invested capital, and attractive valuation.

Q & A

Which cybersecurity company leads in total revenue?

PaloAlto Networks leads in total revenue, generating $8.9 billion in the most recently updated trailing 12-month period.

Which company has the highest compounded annual growth rate (CAGR) in revenue?

Sentinel 1 demonstrates the highest CAGR in revenue at 74.5% between 2019 and 2025.

What was the CAGR of Okta between 2019 and 2025?

Okta's compounded annual growth rate in revenue was 34% between 2019 and 2025.

Which company has the best return on invested capital (ROIC)?

Fortinet has the best ROIC, with a figure of 23%, up from 18.5% in 2021.

Which cybersecurity company showed improvement in return on invested capital despite a negative start?

Okta demonstrated improvement in its return on invested capital, increasing from -7% in 2021 to +0.2% in the most recent period.

Which company had the lowest return on invested capital (ROIC) among the five analyzed?

Sentinel 1 had the lowest return on invested capital, but it showed improvement in recent periods.

What was the forward price-to-earnings (PE) ratio for CrowdStrike?

CrowdStrike had the highest forward PE ratio at 123.

Which company has the lowest forward PE ratio among the five discussed?

Okta has the lowest forward PE ratio at 28.

Which company was rated as 'not a buy' based on the analysis?

CrowdStrike was rated as 'not a buy' due to its high valuation and overpricing in both DCF and forward PE analysis.

Based on the analysis, which cybersecurity stock is considered the best buy for long-term investors?

Okta is considered the best buy for long-term investors, thanks to its strong revenue growth, improving return on invested capital, and undervaluation based on forward PE and DCF metrics.