Most people may not think much about cybersecurity until their identity is stolen or their computer is hacked. But large companies and governments know just how crucial it is to have the right systems in place to fend off threats every minute of every day.
And with those digital threats only increasing and becoming more sophisticated, spending on cybersecurity is expanding. The market is expected to grow from $156 billion in 2022 to $262 billion by 2027.
Investors who are interested in cybersecurity stocks that have the potential to continue growing right along with this market over the next decade should consider CrowdStrike (CRWD 3.63%) and Fortinet (FTNT 1.74%). Here's why.
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CrowdStrike is growing like a weed
If you're unfamiliar with what CrowdStrike does, it offers cloud-based services that help customers protect their mobile devices and computers from online threats.
In its fiscal third quarter (which ended Oct. 31), the company's sales soared by 53% year over year to $581 million, and its non-GAAP net income more than doubled to $96.1 million. But while it beat analysts' top- and bottom-line consensus estimates, investors focused instead on annual revenue guidance that was below expectations.
That was likely a misjudgment on the market's part. Not only did the company's third-quarter numbers demonstrate that CrowdStrike continues to grow quickly, but it also increased its free cash flow by 41% to $174.1 million in the quarter.
Want further proof that this cybersecurity leader is on the right track? Consider that CrowdStrike increased its total subscriptions by a whopping 44% year over year in the third quarter to 21,146.
And when you take a closer look at the company's customers, you'll notice that they're very loyal. CrowdStrike said that 60% of its current customers are signed up for six or more of its subscription services.
CrowdStrike's share price isn't exactly cheap right now, trading at 12.7 times sales. But that price-to-sales ratio is far lower than the 34 it was this time last year.
Given its recent pattern of revenue growth, its loyal and growing customer base, and its ability to tap into a vast (and also growing) cybersecurity market, CrowdStrike could be a great long-term investment.
Fortinet continues its cybersecurity expansion
Fortinet is a leading cybersecurity company that has its hands in everything from physical firewalls to subscription anti-virus services. The company's mix of product offerings across both hardware and software makes it unusual in the cybersecurity space.
In the third quarter, its revenue increased by 33% to $1.1 billion. That growth was fueled both by product revenue (up 39% to $468.7 million) and services revenue (up 28% to $680 million). And non-GAAP net income increased by 58% in the quarter to $262.7 million.
Another indicator that Fortinet's hardware and software are a winning combination is the fact that the company's total billings increased by nearly 33% in the third quarter to $1.41 billion.
The company is also winning lots of new customers -- many of them sizeable. In Q3, the number of customers paying more than $1 million a year for Fortinet's services increased by 80% year over year to 153.
But Fortinet's current price-to-sales ratio of 10 is far below its ratio of 18 this time last year, making it a relative bargain for investors today.
Long-term winners with short-term volatility
You've doubtless noticed that tech stocks have been pretty volatile this year, and CrowdStrile and Fortinet haven't been immune to the market's pessimistic sentiments.
But these two companies look poised to continue growing over the next decade as they tap into the expanding cybersecurity market, and their recent financial results and customer growth rates indicate that they're on the right track.
