Undervalued Cybersecurity Stock Is a Must Buy

GuruFocus.com

- By Naman Shukla

Cyber security stocks have struggled this year, despite the positive trends in the overall industry. Companies in this sector have been spending money heavily to grow, which has negatively affected the bottom-line of companies like Palo Alto Networks (PANW) and FireEye (FEYE). Thus, it is necessary for investors looking to bet on this sector to make their picks wisely. Gigamon (GIMO) is one of my favourite picks from the sector.


Gigamon is a publicly traded network visibility and traffic monitoring technology vendor. The company's products can be configured to manipulate and route traffic to various application performance, network management, analysis, security tools and compliance.

In the most recent quarter, the company reported earnings per share of 30 cents, six cents greater than the analysts' estimates. Revenue came in at $75.1 million, $5 million more than the analysts' estimates. This figure signifies a 46% surge in revenue on a year-over-year basis.

The company's business carries on accelerating along with a 32% growth CAGR over the three years leading up to 2015. The company detailed that security, mobility and the cloud accounts for the three significant growth drivers. Additionally, Gigamon also believes that security and mobility will endure to characterize robust growth drivers for its business.

Gigamon also discussed that the next evolution for infrastructure security will purely depend upon intelligence, context sensitive and authorizing visibility. As a result, these will form new levels of effectiveness for prevailing and imminent security solutions. A substantial portion of the install base of network security solutions, projected at $18 billion and surging, signifies an under-served and swiftly escalating market for the company.

On the other hand, enterprises seeking for security solutions nowadays are usually forced to use multiple products from multiple vendors, so as to put together a solution that eventually provides them with a reasonable chance to reduce breaches. At present, there are no unique and single security solutions that massive enterprises can implement to solve all the problems and to safeguard their data.

Conclusion

Gigamon is not purely a security solution play, but its products provide visibility so that the firms that sell firewalls can essentially access the correct network traffic, allowing them to operate effectively. Hence, Gigamon should definitely benefit from the growth of the cyber security market, which is why I think investors should be bullish on the stock going forward.

Disclosure: I don't hold a position in any of the stocks mentioned in the article.

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This article first appeared on GuruFocus.