Palo Alto Networks (PANW 1.86%) and CrowdStrike Holdings (CRWD 0.81%) are having a forgettable time on the stock market in 2022 thanks to the massive correction that has sent the S&P 500 index down 21% so far this year. But this could be an opportunity for investors to buy fast-growing cybersecurity companies at relatively cheaper valuations.

While Palo Alto stock has slid 12% this year, CrowdStrike has dropped close to 22%. However, both companies have been growing at an outstanding pace as their recent results tell us. More importantly, Palo Alto and CrowdStrike can sustain their terrific growth in the long run thanks to the cybersecurity market's secular growth. But which one of these two beaten-down cybersecurity stocks should investors be buying right now? Let's find out.

The case for Palo Alto Networks

Palo Alto Networks' earnings have increased at an annual pace of 16% in the past five years. Analysts expect the company to switch into a higher gear and clock annual earnings growth of nearly 26% for the next five years.

It isn't surprising to see why Wall Street is bullish about Palo Alto's future. The company's revenue in the recently concluded fiscal 2022 (for the 12 months ending July 31, 2022) increased 29% to $5.5 billion. The company's billings, however, grew at a faster pace of 37% to $7.5 billion. Palo Alto's billings refer to the amount that has not been recognized as revenue by the company and gives investors an idea about the future revenue pipeline.

The growth in Palo Alto's billings can be attributed to an increase in spending by the company's customers. Palo Alto had 1,240 active customers at the end of the previous quarter that had booked more than $1 million worth of its services, up from 986 in the prior-year period.

Palo Alto can keep winning a greater share of customers' wallets in the future thanks to its focus on fast-growing cybersecurity niches such as secure access services edge (SASE), a market that's expected to clock 28% annual growth through 2027. The company had just over 3,550 active SASE customers last quarter, up 50% over the prior-year period. The healthy growth in Palo Alto's customer base and an increase in customer spending are the reasons why the company expects revenue growth of 25% in fiscal 2023 to be nearly $6.9 billion.

More importantly, the company is expected to keep up its solid growth for a long time to come as cybersecurity spending is expected to jump to $267 billion in 2026 from $172 billion this year, according to Gartner. With Palo Alto sporting a solid share of fast-growing cybersecurity niches, the company is in a solid position to make the most of the incremental-revenue opportunity on offer.

The case for CrowdStrike Holdings

CrowdStrike Holdings has been a lucrative investment ever since it made its stock market debut in 2019. Of course, the recent stock market turmoil has given investors sleepless nights, but they shouldn't forget that the cloud security specialist has been growing at a tearing pace.

In the second quarter of fiscal 2023 (for the three months ending July 31, 2022), CrowdStrike's top line jumped 58% year over year to $535 million. The company's non-GAAP net income shot up to $0.36 per share from $0.11 per share in the year-ago period.

CrowdStrike expects to finish fiscal 2023 with $2.23 billion in revenue and $1.32 per share in earnings. Those numbers point toward a 53% jump in the company's top line, while the bottom line could nearly double over fiscal 2022. What's more, analysts anticipate CrowdStrike to maintain such outstanding growth for a long time to come, forecasting 74% annual earnings growth for the next five years.

All this isn't surprising as CrowdStrike's addressable opportunity is growing rapidly. With its current portfolio of cybersecurity offerings, CrowdStrike sees its total addressable market growing to $97 billion in 2025 from $75 billion in 2023. However, the company's total addressable market could hit a whopping $158 billion in 2026, including its planned product roadmap as well as the expansion of the cloud security market.

So, CrowdStrike is simply scratching the surface of a huge opportunity in the cybersecurity space. The good part is that the growth in the company's customer base suggests that it is going in the right direction to capitalize on the end-market opportunity. CrowdStrike had nearly 20,000 subscription customers at the end of the previous quarter, a jump of 51% over the year-ago period.

It is also worth noting that CrowdStrike customers are purchasing multiple solutions, with 59% of its subscription customer base using five or more cybersecurity modules. So, just like Palo Alto, even CrowdStrike seems built for long-term growth.

The verdict

Both CrowdStrike and Palo Alto are high-growth companies that have a bright future ahead of them. CrowdStrike, however, is the one that analysts expect to grow at a faster pace in the long run.

But CrowdStrike's superior growth would come at a cost as the stock is trading at a rich 19 times sales. That's way higher than Palo Alto's multiple of 8.5. Additionally, Palo Alto's forward earnings multiple of 50 is lower than CrowdStrike's multiple of 83. So, Palo Alto appears to provide a better mix of value and growth as compared to CrowdStrike.

But investors with a higher appetite for risk may be inclined toward CrowdStrike stock. It is growing at a faster pace than Palo Alto right now, and analysts' estimates suggest that the trend could continue in the long run as well. However, CrowdStrike's richer valuation means that the stock could witness greater pain on the market in case the sell-off continues, so investors need to keep that possibility in mind.