If I could only buy one stock right now, it would be this one.


Cybersecurity has become increasingly important over the past few weeks. In fact, Google Trends reveals that the search term “cybersecurity” is more than 50% more popular than a year ago. Obviously, the cyberattacks associated with the Russian-Ukrainian conflict have an impact on these results, but this does not negate the importance of having an appropriate security solution.

With the degree of integration in the world, every business needs a robust cybersecurity plan to prevent enemies – whether terrorists, individuals or another country – from gaining access to information and to vital infrastructure. While there are several potential cybersecurity investments, none excites me more than Crowd ( CRWD 1.93% ). The leader in endpoint protection offers its software through the cloud and has been proven to prevent many types of cyberattacks seen in recent events.

Image source: Getty Images.

Customers are using Crowdstrike products more

Crowdstrike’s core offering is its Falcon platform. Cloud-delivered software prevents attacks and continually improves the platform by analyzing over 1 trillion events captured daily for all customers. And this is just the beginning of its product line, as Crowdstrike offers more than 20 other modules such as firewall management and malware scanning. Most customers tend to use multiple modules, and Crowdstrike has grown with the number of modules used.

At the date 4 modules or more 5 modules or more 6 modules or more
January 31, 2022 69% 57% 34%
January 31, 2021 63% 47% 24%

Data source: Crowdstrike. Table by author.

If Crowdstrike’s modules weren’t effective, customers wouldn’t add more; they would change providers.

One form of malware seen in Ukraine is wipeout malware that Crowdstrike calls DriveSlayer. While this attack can delete critical files and render a computer inoperable, Crowdstrike prevents this attack so customers can rest easy, even with the threat of this type of cyberattack looming.

Strong growth and free cash flow

Crowdstrike’s actual product offering is best-in-class, but its finances really sell the stock as an investment.

For its fiscal year 2022 (ended Jan. 31, 2022), Crowdstrike posted revenue of $1.45 billion, up 66% from last year’s total. Q4 2021 customers spent an average of 24% more than last year (including those who left and are no longer spending), and Crowdstrike retained 98.1% of all spend from Q4 2021 to fourth quarter of 2022, showing that it is retaining customers well. It also added 1,638 net new customers in the quarter, up 65% from last year’s number.

Crowdstrike does a great job of acquiring new customers and increasing spend with existing customers, making it one of the fastest growing companies in the market today. However, growth is not high on the market’s wish list at the moment, so how does it stack up on the profitability side?

Although not profitable under GAAP (generally accepted accounting principles), Crowdstrike posted non-GAAP net earnings per share of $0.67, up 148% from $0.27 a year earlier. last year. From a GAAP perspective, Crowdstrike lost $1.03 per share. The difference between those two numbers is largely stock-based compensation, which Crowdstrike spent $310 million on throughout fiscal 2022.

Examination of free cash flow reveals a self-funded business, as Crowdstrike converted 30.5% of revenue into cash for a total of $442 million for the year. While it won’t generate much excitement from the market, Crowdstrike will be able to continue operating without needing to go to market for additional funding, allowing it to survive a downturn in the economy.

Person viewing data on multiple computer screens in a dark room.

Image source: Getty Images.

Solid advice with a history of exceeding expectations

Management’s fiscal 2023 revenue forecast is $2.15 billion at the midpoint, which would represent a 48% growth rate from fiscal 2022. Although this is an excellent outlook in itself, management has consistently blown its own projections over the past two years.

Tips for the fiscal year Original Tips Current result To beat
2022 $1,315 million $1,450 million ten%
2021 $728 million $874 million 20%

Data source: Crowdstrike. Table by author.

With a strong track record of reports beating forecasts, investors can expect the company to beat stated expectations, particularly if the geopolitical climate remains messy. Keep in mind that this tension is often more appealing to cybersecurity experts like Crowdstrike.

Compared to its cybersecurity peers, Crowdstrike has seen an extreme valuation drop, but is also priced bottom when assessed from a free cash flow perspective.

Table of CRWD PS ratios

PS CRWD report given by Y-Charts.

It’s a steep price to pay for any stock – 29 times sales and 98 times free cash flow is by no means cheap – but investors have to pay if they want to own a cybersecurity business. top notch with huge growth coming from it.

In my opinion, there really is no greater growth stock available right now than Crowdstrike. It has both industry headlines and tailwinds, consistently maintains its customers and adds new ones, is profitable on a cash flow basis, and is well off its lofty valuation. Over the next decade, I expect Crowdstrike to expand its market leadership and capture nearly every major company available. It already has 65 Fortune 100 banks, 254 Fortune 500 banks and 15 of the top 20 banks subscribing to its software, making it the undisputed industry leader.

Crowdstrike seems to have a huge hold on the cybersecurity industry. With continued expansion and customer adoption, this will be one of the best titles to own for the next three to five years and beyond. Consider grabbing a few stocks today, down about 35% from the all-time high.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.


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