CRWD vs ZS valuation comparison

Looking into CRWD and ZS relative valuation metrics:
EV:
CRWD- ~$19,600m
ZS- ~13,000m

TTM Revs:
CRWD- $563.4m
ZS- $391.5m

Trailing EV/S:
CRWD- 34.8
ZS- 33.2

FY21/FY20 guidance midpoint (implied YoY growth %) Their FY Qs do not line up so not a perfect comparison. CRWD in FY21Q2. ZS in FY20Q4. So CRWD YoY growth should increase over next 3Qs more than ZS through 1Q.
CRWD- $766m (+59.2%)
ZS- $423m (+39.7%)

YoY growth from recent ERs-
CRWD- +85%
ZS- +40%

Forward EV/S using (recent Q + next Q guidance)*2-
CRWD- 26.81
ZS- 28.44

In general CRWD is growing revenues at a much higher pace (>2x) than ZS from a higher base, but the market is giving them about the same valuation multiple. CRWD profitability numbers seem to be increasing at a faster pace as well. I know ZS was once a big name here and fell off sharply with their growth issues last year. They seem to have fixed their issues and billings accelerated in their recent report a decent amount.

It seems the market is saying that ZS has a moat that is stronger than CRWDs. Maybe because of the perceived Endpoint segment that CRWD is in? CRWD’s recent results show that they are completely dominating their market. The market seems to expect that to end soon and CRWD’s growth rate to fall off? I don’t see that as likely with the new world we live in. I would be interested in ZS again, but I don’t get why they have a valuation similar to CRWD with much lower growth rates. Any thoughts?

Long CRWD

28 Likes

It seems the market is saying that ZS has a moat that is stronger than CRWDs. Maybe because of the perceived Endpoint segment that CRWD is in? CRWD’s recent results show that they are completely dominating their market. The market seems to expect that to end soon and CRWD’s growth rate to fall off? I don’t see that as likely with the new world we live in. I would be interested in ZS again, but I don’t get why they have a valuation similar to CRWD with much lower growth rates. Any thoughts?

It really depends on what month you do these calculations at. CRWD traded at 50x sales if I recall correctly when they went public, or at least shortly afterward. ZS at it’s very peak in 2019 was at around 40x sales. Since then CRWD has only consolidated as it’s sales went up to show a lower P/S ratio. Nothing has really changed at CRWD, it has only been executing. Meanwhile ZS has only gone up due to the Work From Home rally. It is my opinion their quarter was not even that great yet the stock went up even more afterwards.

It seems if you try to read too much into what the market thinks about a certain stock or look to it for sage advice as to what a stock is worth, you may as well be looking for wisdom from a madman. It is fickle and constantly changing it’s perception on things.

17 Likes

Bnh, CRWD growing 2x ZS as u have mentioned. Crwd dominates cloud Endpoint protection and moving toward (wants to dominate) ALL cloud workload protection. As Kurtz mentioned during the conf.call - this is mainly greenfield opportunity and not displacing old players. Considering huge acceleration of moving everything to the cloud - CRWD future looks bright.

Where I can see perhaps source of some discount the market gives to CRWD - the market lumps it with all the endpoint protection providers and thinks that there is huge competition in this field. Hence, multiples are lower, e.g. compared to DDOG. Hastan commented recently on that saying that it´s unreasonable buy security company with such valuations. I don‘t agree with him and 80+ growth confirms that, but the future will show us if the hypergrowth is sustainable or competition will truly catch up.

1 Like