Cybercrime costs the global economy more than $1 trillion annually, according to McAfee (MCFE). This amounts to around 1% of the world's total output. Much of the costs are incurred after an attack when a company must restore systems, notify customers of breaches, pay settlements or ransoms, or do other damage control.

Because of this, companies realize that an ounce of prevention is truly worth a pound of cure, and they are spending more on cybersecurity solutions. These three cybersecurity stocks are poised to take off as a result.

Person using a laptop with a virtual flowchart of security locks and encrypted data.

Image source: Getty Images.

1. Fortinet

Fortinet (FTNT -0.79%) is a global provider of cybersecurity solutions. The stock has risen more than 140% over the last year, and this market outperformance is set to continue. Unlike many upstart cybersecurity companies, Fortinet is highly profitable and established, having been a public company since 2009. It expects to have a total addressable market (TAM) of $174 billion by 2025. 

FTNT Chart

FTNT data by YCharts

Revenue has had a solid 23% compound annual growth rate (CAGR) since 2018. Fortinet expects to achieve $3.3 billion in top-line revenue for fiscal 2021, with most of that coming from services. This is important because the service revenue is stable and recurring. 

In addition, based on the midpoint estimates, the company expects an adjusted gross margin of 77% for full fiscal 2021 and an adjusted operating margin of 26%. The forecast calls for $3.85 to $3.95 in earnings per share for 2021, well above $2.91 from 2020. 

Fortinet currently trades at a forward price-to-sales (P/S) ratio of just under 15, higher than historical averages. But the company's recent performance merits a higher valuation, and the stock is likely to continue to outperform the market for long-term investors. 

2. Tenable

It is difficult to protect assets and systems if a company is not aware of the vulnerabilities. This is where Tenable Holdings (TENB -1.32%) comes in. Its software as a service and on-site platform specializes in vulnerability management (VM). The platform allows companies to visualize and uncover weaknesses and secure digital assets. This service is essential, which is why over 50% of the Fortune 500 are Tenable customers. 

In total, Tenable boasts over 35,000 customers in 35 countries. The company has added 10,000 customers over the last three and a half years. Revenue has increased markedly over this time as well. 

Chart of Tenable's revenue 2018 - 2021

Data source: Tenable. Chart by author.

As shown above, Tenable's revenue has increased at a CAGR of 26% since 2018 and is estimated to reach $536 million for fiscal 2021. This puts the company squarely on a path to reach its goal of $1 billion in annual revenue by 2025.

Unlike Fortinet, Tenable is not yet profitable on the basis of generally accepted accounting principles (GAAP). However, the non-GAAP (or adjusted) gross margin of 82% suggests that the business model is scalable. In fact, the company expects to have an adjusted operating margin of 9% in 2021. Tenable is currently trading at a forward P/S ratio of just over nine and could have significant upside for long-term shareholders. The stock underperformed the market in 2021, but that could change quickly in 2022 as cybersecurity and VM remain a top priority for companies. 

3. CrowdStrike

It is difficult to talk about hot cybersecurity stocks without mentioning CrowdStrike Holdings (CRWD 1.25%). It provides an artificial intelligence platform to protect workloads and endpoints. The company is growing incredibly fast due to its successful sales and marketing spending, the quality of the product, and its ever-expanding TAM. In the fiscal year 2017, CrowdStrike reported just 450 customers. In the third quarter of fiscal 2022, the company serviced over 14,600 subscription customers, including more than half of the Fortune 500. It estimates its TAM will reach $116 billion by 2025.

Subscription annual recurring revenue (ARR) has grown 67% year over year so far in fiscal 2022. CrowdStrike reported over $1.5 billion in ARR for the first time in the third quarter. Along with the growing customer base, much of the increase in revenue is due to existing customers spending more with the company. It has reported an impressive net retention rate of well over 120% for the last three years.

CrowdStrike is not yet GAAP profitable as it executes its high-growth strategy. But the adjusted subscription gross margin of 79% suggests massive scalability. Even better, the stock now trades more than 30% off its 2021 highs, which may be a compelling entry point for long-term investors.