Posted this on the premium site yesterday. I have found the valuation between CRWD and PANW as CRWD seems to be going up faster than PANW. Can anyone explain this. Is it just the fact that the clean cloud story is easier to explain? Faster growth, more cash flow and an additional business that is growing slowly and highly profitable for free…. A little baffling to me. And just for fun I included some comparisons to the two smaller Cyber companies that were discussed here recently, RBRK and CBYR. What do you think? So many on this board (who I respect) all seem to own CRWD but not PANW. Anyway, here is the post…
I have been thinking further about the comparative valuations of these companies and decided that I was maybe a little too conservative in my comparison calculation. This post will look a little deeper at the company size (market cap) versus Revenues (ARR). I will also look at all 4 companies I have discussed rather than just comparing CRWD vs PANW and also add two much smaller companies that were brought up in a thread on a separate board.
(As a separate note, if you have not ever ventured over to “Saul’s Investing Discussion” in the public boards you should check it out. Lots of content looking at very high growth companies with good discussions and no hype as they limit who can post there.)
But first let me remind everyone of the “size” of each company based on their ARR (Annual Recurring Revenue) including the year over year growth rate of that ARR.
Company…ARR ($M)…% increase(yr/yr)
S………….…….948………………24%
PANW…….… 5,100………….….34%
CRWD……….4,440………..……22%
ZS ………..….2,900………….…. 23%
Now lets include the market cap here:
Company…ARR ($M)… Market Cap
S………….…….948………………… $5.9B
PANW…….… 5,100……….…… $136.2B
CRWD……….4,440………..…… $123.2B
ZS ………..….2,900………….….. $48.6B
and the Market Cap/ Revenue (ARR) ratio:
S 6.2 X
PANW 26.7 X
CRWD 27.7 X
ZS 16.8 X
So first off, and this is why I started the post in the first place, CRWD is actually more expensive than PANW straight out. This despite the higher growth rate of ARR in PANW and the exclusion of the entire firewalled Cyber security business that PANW also has, which is very significant! This seems kind of crazy to me. PANW should be more expensive than CRWD just based on the higher growth rate 34% vs 22%. If you believe these rates, which has been very consistent over that last few years, albeit they are all falling, it should be significantly more expensive.
After that if you compare CRWD vs S and ZS since their growth rates are very similar, ZS and S are cheaper with S being significantly cheaper. This probably has to do the actual earnings and free cash flow of the two smaller companies, but does make me want to invest a little time to study further.
Finally, since two smaller cyber companies, Rubrik and Cyberark were brought up in response to my post on Saul’s board, I figured I might was well throw those comparisons in as well.
Company % Growth ARR Total ARR
RBRK … … … …38%… … … .. … … 1.18B
CYBR … … … …50% … … … … … .. 1.22B
and Market Cap and Market Cap/ ARR ratio
RBRK 17.5 B … and 14.8X
CYBR 20.1 B … and 16.4 X
Both pretty comparable to ZS. Anyway, pretty interesting. I started this because I couldn’t believe how much CRWD has run preferentially over PANW and I don’t understand it. I still don’t but now i also need to think about and perhaps look into why the other cyber companies are so much cheaper, at least on this one metric and does make both CYBR and RBRK interesting stocks to look at due to their higher growth rates.
Randy
Long CRWD and PANW and PANW Tickerguide