6:14 AM
admin
MAKE MONEY BLOG$ ~Although they don’t like to talk about it, organizations are vulnerable to hackers looking to steal data or simply to embarrass their targets by scrawling grafitti on their web sites. For decades, companies have installed so-called firewalls to keep this from happening.
But big changes in technology have opened up new vulnerabilities and the tit-for-tat battle between the white and black hats continues. In its April 6th IPO prospectus, Palo Alto Networks (PAN), a fast-growing player in the firewall market revealed some compelling facts about its success — including its pedigree from a long-time firewall leader, Check Point Software (CHKP).
In looking at potential investments, I like to consider five factors: the attractiveness of the industry in which the company competes, the market position of the company in that industry, the quality of the management team, the company’s financial performance and prospects, and its valuation.
Based on these factors, PAN looks like an interesting investment opportunity. After all, it competes in an attractive industry, its market share is expanding much faster than the industry, its management has an excellent track record, and it has even started to earn a profit. And by one estimate, PAN’s valuation is likely to be in line with that of Check Point.
Although it’s not really fair to compare a long-established market leader with a company poised for an IPO, as an investor you will soon have a chance to do so. That’s why my reasoning for this analysis is partially based on a comparison with Check Point.
Here are my conclusions:
- Industry attractiveness: PAN competes in the enterprise network security market. This market includes Firewall/Virtual Private Network (VPN), Unified Threat Management (UTM), Web Gateway, Intrusion Detection and Prevention (IDP/IPS), and Virtual Private Network (VPN) technologies. IDC estimates that the enterprise network security market was $10.2 billion in 2011 and is projected to grow at a 9.5% annual rate to $13.4 billion by 2015, according to SAN’s prospectus.
- Market position: PAN is growing 21 times faster than the industry. Rivals such as Cisco Systems (CSCO) and Juniper Networks (JNPR) are market leaders. But thanks to new technologies such as Web 2.0, social media, and Software as a Service (SaaS) — traditional firewall technologies using so-called stateful inspection are not able to predict how traffic targeting a corporate network will behave. PAN’s technology, however, uses an approach that protects against threats from these new technologies and as a result, it has been growing much faster — at a 198% annual rate between 2009 and 2001 — than the industry. This growth is impressive compared to Check Point’s 13% revenue growth but what is most remarkable is PAN’s accumulation of 6,650 enterprise customers since its 2007 founding.
- Management. PAN’s CEO, Mark McLaughlin, has an impressive track record. He took over as CEO of VeriSign (VRSN) after it acquired Signio, an Internet payment company where he ran sales, and ran VeriSign until July 2011. Meanwhile, PAN’s chief technology officer and co-founder, Nir Zuk, was CTO at Juniper Networks (JNPR) and worked as principal engineer at Check Point.
- Financial performance: While PAN’s growth has been more impressive than Check Point’s, it has further to go in the competition for profits. To be fair, PAN has earned a 4% net margin for the six months ending January 2012. But PAN has far to go before it catches up with Check Point’s whopping 44% net margin.
- Valuation: Seeking Alpha believes that PAN should be valued at the same level as Check Point — 10 times trailing sales. This would put its valuation at $2 billion (10 x $200 million in 12 month sales).
It looks to me as though Palo Alto Networks is shaping up to be among 2012′s more solid IPOs. Given its potential to continue outgrowing the industry, its competitively superior product, and its strong management team, it is easier to envision this stock going up after it is sold to the public.
Far more than Facebook – with its Price/Sales ratio of 20 on slowing growth — PAN looks like it could be fairly valued and well-positioned to maintain its high growth. And that makes it a much better pillar on which to build confidence in the IPO market.
source: forbes.com
please give me comments thanks
Posted in: 
0 comments:
Post a Comment