Growth stocks can help increase the value of your investment portfolio so you can achieve a comfortable retirement. However, you must be critical when choosing the right stocks for the long term. Some companies may falter and fall by the wayside, while others may see their growth fizzle out over time.
Because of these risks, it makes sense to look for stocks that follow sustainable trends that can provide growth upside for years or even decades. Cybersecurity is one of the sectors with strong demand and can ensure that the players in it can enjoy steady growth in the long term.
As more companies move to cloud platforms amid a wave of digitalization, cybersecurity is more important than ever for these companies to ensure their sensitive data is properly protected. Here are three promising cybersecurity stocks that you can safely buy and own over the next decade.
CyberArk software
CyberArk software (NASDAQ: CYBR) is an identity management company that provides comprehensive security screening for enterprise applications, cloud platforms and corporate workspaces.
For 2023, revenue increased 27.1% year-over-year to $751.9 million, while gross profit improved nearly 28% year-over-year to $595.8 million. The gross margin increased slightly from 78.7% to 79.2%. CyberArk also generated positive free cash flow of $51.3 million for the year, up 37.8% from last year’s $37.2 million.
The momentum has continued into the first quarter of this year, when CyberArk reported strong earnings figures. Revenue rose 37% year over year to $221.6 million, while gross profit rose 42.5% to $179.1 million, translating into a gross margin of nearly 81%. The identity management company also generated free cash flow of $66.8 million, up sharply from $4 million a year ago.
Of the company’s total revenue, 93% was recurring, with recurring revenue increasing 41% year-over-year to $206 million. Annual recurring revenue also grew 34% year over year to $811 million.
More growth could be in store for CyberArk after it announced the acquisition of Venafi for $1.54 billion in cash and stock. Venafi is a leader in machine identity management and through this acquisition, CyberArk management hopes to create a unified platform for enterprise-level machine identity security.
Not only will this transaction be immediately accretive to CyberArk’s margins, but management believes it will create revenue synergies through cross-selling, up-selling and geographic expansion. The purchase will also increase CyberArk’s total addressable market (TAM) for identity security from the current $50 billion to approximately $60 billion.
Meanwhile, the company is also integrating artificial intelligence capabilities into its identity security platform. This inclusion enables customers to gain valuable insights and apply advanced identity threat detection to reduce response times. As CyberArk’s software becomes more attractive, it will result in stronger customer loyalty.
Fortinet
Fortinet (NASDAQ: FTNT) has an integrated portfolio of more than 50 enterprise-level cybersecurity products. More than half a million customers use the company’s products to protect people, data and devices.
The company delivered an impressive performance last year, with revenue increasing 20.1% year over year to $5.3 billion. Operating income rose 28% to $1.2 billion, while net profit rose almost 34% to $1.1 billion. The company also generated positive free cash flow of $1.7 billion, an increase of almost 20%.
Fortinet continued to perform well in the first quarter of this year. Revenue rose 7.2% year over year to $1.3 billion, while net profit rose 20.8% to $299.3 million. The cybersecurity company generated $608.5 million in free cash flow this quarter.
The company has also done well in returning cash to shareholders through share buybacks. Approximately $5.3 billion has been purchased since 2020, resulting in an 11.4% reduction in the number of shares outstanding.
Fortinet has also integrated generative artificial intelligence capabilities to enable natural language processing functionality, helping customers increase operational efficiency and simplify the user interface.
Management has set a TAM of $144 billion in 2024, which will grow to $222 billion in four years, providing Fortinet with ample opportunity for further growth.
CrowdStrike
CrowdStrike (NASDAQ: CRWD) operates the CrowdStrike Falcon platform, which helps customers detect threats and protect data, giving them protection and better performance.
The company has shown robust growth with revenue up 36.3% year over year to $3.1 billion for the 2024 fiscal year ending January 31. The company generated net income of $89.2 million for the fiscal year, offsetting losses of $183.2 million. in the previous year. Free cash flow also improved nearly 40% year-over-year to $940.2 million.
The first quarter of fiscal 2025 saw similarly strong performance, with CrowdStrike recording a 33% year-over-year increase in revenue to $921 million. Higher interest income and investment gains pushed the company’s net income to $42.8 million, significantly higher than the $491,000 reported the previous year. Free cash flow came in strong at $323.1 million, an increase of almost 42%.
CrowdStrike uses partnerships to drive further growth. The company announced an expanded distribution agreement with Ignition Technology to deliver its cybersecurity platform to the latter’s Nordic partner base. Together, both parties will identify threats and help organizations stop breaches.
The company also partnered with Google Cloud to transform cybersecurity using artificial intelligence, working together to stop cloud intrusions and keep sensitive data safe.
Management has reported a TAM of $100 billion for 2024, including managed services, endpoint security, and threat intelligence, among others. This TAM is expected to grow to $225 billion by 2028, allowing the Falcon platform to spread its wings and increase CrowdStrike’s revenues and earnings in the coming years.
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Royston Yang has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in CrowdStrike and Fortinet. The Motley Fool has a disclosure policy.
3 Cybersecurity Stocks to Buy and Hold for the Next Decade was originally published by The Motley Fool
