Top 3 Cybersecurity Small Cap Stocks Generating Earnings

With the ongoing hacks in the world, cybersecurity has been one of the fastest growing industries. When there’s a large-scale cyber attack, or hack, you might notice that cybersecurity-related stocks tend to gap up higher. This is primarily due to market participants’ views that there could be increased demand for cybersecurity hardware, services and software in an attempt to stave off future cyber attacks. Now, with the Internet of Things, it’s become quite easy for hackers to hack into devices and computers for their own benefit. That said small cap stocks in this industry could provide some trading and investing opportunities.

Most recently, we’ve witnessed the WannaCry ransomware attack, which targeted Windows OS by encrypting users’ data and demanding ransom for their data back in the form of bitcoin. The following day, a bunch of cybersecurity-related stocks gapped higher in the wake of the attack. Cyberattacks don’t look like they’re going anywhere, and therefore, small cap cybersecurity stocks could rise due to the increased revenues and earnings potential. Here are the top three small cap cybersecurity stocks that are currently generating earnings.

Top Three Cybersecurity Small Cap Stocks

Qualys Inc

Qualys Inc (NASDAQ: QLYS) had a market capitalization of $1.54B, as of July 7, 2017, and therefore, it still has upside potential. Now, Qualys is one of the leading providers of information security and compliance cloud solutions. The  Qualys Cloud Platform and its integrated suite of solutions provides companies with simple-to-use security operations and could potentially lower the cost of compliance through the delivery of critical security intelligence, as well as allowing for the automation of the full spectrum of auditing, compliance and protection for IT systems and web applications.

Moving on, let’s take a look at the fundamentals of Qualys. The company had revenue of $205M over the past 12 months, and its revenues have been steadily increasing since 2017, on an annual basis. Consequently, it’s gross profit has also been on the rise. Here’s a look at an excerpt of its income statement.

Source: Morningstar

Now, due to company management limiting expenses, Qualys has been able to operate at a profit, and its diluted earnings per share has followed the overall trend of the company’s revenues. Over the past trailing 12-month period, Qualys had a diluted earnings per share (EPS) of 93 cents. Consequently, the stock was only trading at 44.6 times its EPS, while the average company in its industry of Software Applications, according to Morningstar, was trading at over 100 times its earnings. That in mind, Qualys might be considered undervalued, in relation to some of its peers and could provide some trading and investment opportunities.

Here’s a look at QLYS on the daily chart.

small cap stocks

Source: TradingView

CyberArk Software Limited

Cyberark Software Ltd (NASDAQ: CYBR) is another company in the cybersecurit small cap stocks space that is looking to combat cyber threats and dedicated to stopping cyberattacks before they do any harm to companies. Now, CyberArk  is trusted by some of the world’s leading companies, which includes over 45% of Fortune 100 companies, in order to protect their infrastructure, applications and assets.

Although CyberArk had a market capitalization below $2B, it’s been around for more than a decade and has been a leader in the industry, in protecting companies against cyber attacks. Currently, CyberArk is offering targeted-security solutions in an attempt to help leaders get ahead of cyberattacks and prevent attacks from escalating before irreversible business harm is done.

Now that we’ve got an idea of what the company does, let’s move on to some of its fundamentals.

Source: Morningstar

If you notice, CyberArk Software has been growing its earnings since 2012 at a fast pace. Over the past trailing 12-months CYBR had total revenue of $229M and its cost of revenue was just $33M. Consequently, the company had a gross profit of $196M. Similar to Qualys, CyberArk has been able to keep its expenses relatively low, and therefore, it’s been able to grow its net income at a fast pace since 2013. That said, CyberArk has grown its diluted EPS by over 200% since the 2013 fiscal year, and it currently has a trailing 12-month diluted EPS of 87 cents.

Check out CYBR on the daily chart below.

Source: TradingView

AVG Technologies NV

AVG Technologies NV (OTCMKTS: AVGTF) is another cybersecurity-related small cap stock that could have some upside potential with the increasing demand for services and software to protect against cyberattacks. Now, AVG Technologies NV trades over the counter, and therefore, it’s not subject to stringent regulations, like CyberArk Software and Qualys. However, that doesn’t mean it’s not a legit company. AVG Technologies’ anti-virus software has millions of users who are looking to protect their systems from Internet- and data-related threats.

Moving on, let’s take a look at some financials. Although AVG had a slight dip in its revenues, in 2014, AVG has grown its earnings significantly since the 2011 fiscal year. Here’s a look at AVG’s revenue growth.

Source: Morningstar

Moreover, AVG Technologies has been operating at a profit, and it has a diluted EPS of 87 cents over the past trailing 12-months.

Take a look at AVGTF on the daily chart.

Source: TradingView

The Bottom Line

Cybersecurity has been in the news, and the reality is…everyone needs to beef up their security in order protect their data and systems. Consequently, this could drive earnings and revenue growth in the industry, and these three cybersecurity small cap stocks that are currently generating earnings and could have upside potential.


Please enter your comment!
Please enter your name here