Since the coronavirus-induced market sell-off in March, CrowdStrike Holdings(NASDAQ:CRWD) stock price more than doubled, but it stays more than 20% below its all-time highs. As the cloud-based security specialist should profit from the increase in demand for securing remote working environments because of the coronavirus pandemic, is it still time to buy CrowdStrike stock after its recent rally?

High revenue growth

Even before stay-at-home policies boosted the demand for remote working capabilities, CrowdStrike had been posting stellar revenue growth. During its last fiscal year ending on Jan. 31, revenue jumped 93% year over year to $481.4 million. And management expects revenue to land in the range of $723.3 million to $733.3 million during this fiscal year, up 51.3% at the midpoint. Despite that strong deceleration because of the company's growing scale, that forecasted revenue growth remains impressive.

CrowdStrike's strong growth is due to the simplicity and efficiency of its cloud-based endpoint security solution, which consists of a piece of software that protects computers and mobile devices from anywhere by leveraging cloud-based threat detection based on artificial intelligence (AI).

In addition, the company should profit from the sudden surge in the demand for securing remote working capabilities, as many enterprises could deploy CrowdStrike's solutions on short notice at the beginning of the coronavirus crisis.

CrowdStrike has yet to release its fiscal first-quarter results on June 2, but the recent earnings of other Software-as-a-Service (SaaS) cybersecurity vendors over the last few weeks indicate stay-at-home policies represented a tailwind, at least in the short term. For instance, during their respective latest earnings calls, FireEye and Check Point Software Technologies both highlighted the strength of their cloud-based endpoint solutions amid the coronavirus crisis.

Hand touching cloud with padlock icon

Image source: Getty Images.

Intensifying competition

Given the secular growth of cloud computing, the cloud-based endpoint protection market has been attracting many competitors even before the world realized the coronavirus crisis could accelerate the adoption of remote working over the long term.

The research company Gartner listed 20 competitors in its endpoint protection platforms ranking system, called Magic Quadrant, last year. It positioned CrowdStrike among the five leaders in terms of ability to execute and completeness of vision. However, the competition is intensifying, and Gartner's ranking didn't yet include new solutions high-growth SaaS vendors have recently proposed.

For instance, the cloud-based security compliance specialist Qualys enhanced its portfolio and leveraged its cloud infrastructure with a new remote endpoint protection solution it now offers for free. After its acquisition of the endpoint protection company Endgame last year, the cloud-based monitoring vendor Elastic also developed an endpoint protection product that complements its core offerings.

Rich valuation

Given its high sales and marketing expenses as a percentage of revenue -- 55.4% last year -- to fuel its strong growth and gain market share, CrowdStrike remains unprofitable: Last year, it accumulated $62.6 million of non-GAAP (adjusted) losses. With scale, the company is getting closer to profitability and management forecasted non-GAAP net losses to diminish to a range of $22.1 million to $29.3 million this year.

However, you should keep in mind that non-GAAP earnings exclude some costs, mostly share-based compensation. Taking into account those extra costs that amounted to $79.2 million last year, GAAP losses reached $141.8 million.

With $912.1 million of cash, cash equivalents, and marketable securities and no debt, CrowdStrike can sustain many years of losses to keep on funding its growth with high sales and marketing expenses, though. And the company won't face any financial difficulties if a prolonged recession materializes.

In any case, the market values CrowdStrike at a high enterprise value-to-sales ratio of 10.7, based on the midpoint of management's full-year revenue guidance range.

With that rich valuation, the market indicates that it expects flawless execution over the long term for CrowdStrike to sustain its strong growth and become profitable in the context of intensifying competition. Thus, given the lack of margin of safety, prudent investors should rather stay on the sidelines.