Cyber Security comparisons

Let me start by saying I am the PANW tickerguide and last june I put a comparison
of four of the cyber security companies to see if I could understand how PANW is doing
versus the other three smaller, faster growers. The 4 I chose are ones I followed:
PAWN, OKTA, ZS, and CRWD and I looked at sales, earnings, size and price.

I liked the result and so repeated the process for the most recent quarter at the year
end and I thought I would share here on Saul’s board since there is much interest in
the industry, and the other company’s community boards as well. It is a little focused
on Palo Alto, but so be it, they are the big dog here (but not necessarily the best)…

So here is the post…

I realize these four are all different and don’t even do exactly the same functions
but thought it would be an interesting comparison since Palo Alto seems to be
on the cheaper end of things compared to some of the newer, smaller companies.
I recognize that the reason for this is both the growth rate and the perceived
shift from firewalled systems and hardware to cloud based operations. I am in
no way trying to put together any definitive answers but thought the back to
back numbers comparisons might be good. In any event, here is what I had from
last June quarter….


                           PANW       OKTA      ZS      CRWD
Revenues Qtr ($M)          869.4      182.9    110.5    178.1
Billings growth(%)          24%        46%      55%      85%
Non-GAAP Net Inc ($/sh)    1.17      -0.17     0.07     0.02
Free Cash Flow (FCF $M) not given    29.8M     9.0M      87M
Adj FCF Margin             27%        16%      8%       49%

Fiscal 2020 expectations
Revenue- Mid    ($B)       3.37     0.775     0.423     0.765
  % growth                 13%        32%       40%       59%

Price/Sales                6.5       30.1      31.4      26.3     
(Based on this year expectations)

And here is an update for the year end quarters for each……


                               PANW      OKTA      ZS      CRWD
Revenues Qtr ($M)             1016.9     234.7    157.0   264.7   
Billings growth(yr/yr %)        25%       30%      55%     74%     
Non-GAAP Net Inc ($/sh)        1.55      0.11     0.10     0.13
Free Cash Flow ($M)         295M(calc)   32.5M     18M     97.4M 
Adj FCF Margin                  29%       14%      11%     37%     

Fiscal 2021 or 2022 expectations
Revenue- Mid    ($B)            4.175    1.08      636     1.315  
  % growth                       22%      29%      48%      50%

Price/Sales                      7.8      25       36       34
Share price used                 $330    $208      $167     $200        
Sales based on this year expectations

Interesting comparison. So much to look at here from both the absolute
values from the recent quarter and a relative comparison to how things
have changed since June.

Clearly the big dog here, almost twice the size of the other three combined.
Also, lower growth rates, and lower enterprise value versus sales. The
obvious question is whether the others will slow down before they get to
PANW’s size. More on this later.

Nothing wrong with OKTA’s numbers but feels like the odd man out here on a
comparison basis. Growth rate shrinking. FCF margins shrinking, second in
size but looks to be passed by CRWD shortly. Only positive is cheaper
enterprise value compared to the other fast growers, but that seems
expected and perhaps that reduction is not done.

So it looks like ZS is hanging in there with growth rates holding up well
but they are also the smallest of the 4. With size, growth rates and FCF
margins lower than CRWD and enterprise value higher, it is hard to see a
reason to own them over CRWD. Having said that, the numbers are all pretty
amazing and if not being compared to the other cyber security companies,
I would probably be drooling.

The continued clear best of breed here based on my comparisons. Growth
rates stand above the others, FCF margins are amazing for a company
growing this fast and significantly above the others (although dropped a
bit since June). The only question in my mind is whether the numbers will
hold up as they grow versus PANW. Which leads me to talk about size.

Clearly Palo Alto is the big dog here with close to 2X of the revenue of
the other 3 combined. Growth percentage is lower but on a much larger
number. The question to asked is whether the other companies will catch up
if the growth rates slow as expected due to the effect of large numbers.
One interesting comparison is looking at the absolute quarterly revenue
increase for each (yr/yr )…

 **PANW     OKTA     ZS     CRWD**
**Absolute Rev increase (over last June post)  168M     58M     39M     87M**
 **Rev increase (Yr/Yr)             	     200M     67M     58M    106M**

I find this interesting because despite the smaller growth rate, the amount
of new sales is actually very strong and somewhat hidden when looking at
percentage increases. I guess the big question is whether PANW can use it’s
position to control the cloud growth. It seems that the upstarts are definitely
catching up but the question is whether they will continue as the get bigger.
It’s not an obvious thought but if this is really and land and expand process
where you want to get the most customer revenue quickly because it is painful
to switch, then PANW could claim to be winning. They basically had more new
revenue in the last than the other three combined.

One thought I have is that the very best products don’t always win, it is easier
to add a product from your current supplier than to switch suppliers overall.
Will PANW make the switch to cloud services before the others can catch up? I
don’t know but since the price/sales ratio is ? of the others while it is
getting more absolute sales gains certainly makes me think.


The last time I posted this I stated that CRWD is clearly the best of the 3
smaller companies and has huge promise to be eventually the biggest, but I
also said that PANW’s size advantage may actually hold up long term. I
think that still applies.

For full disclosure, I own positions in CRWD and OKTA, but this makes me think
I should be at least making a purchase in PANW to cover my bases.

Finally, what an industry! If you don’t own any of these Cyber security stocks,
I would highly recommend getting into one or more of them. The growth continues

PANW Tickerguide. Long CRWD and OKTA for now.


There was recently a very informative post-mortem of a company that supposedly had a better product than the early Mongo DB but misjudged the market’s needs/wants.

That said, isn’t this one sector where the best product should in fact have the upper hand, especially if cloud-native, especially since last December, especially if the charging bull is already a known commodity and not an obscure startup?

If artificial intelligence is critical to get the job done in cybersecurity (and increasingly so across the board), where does PANW stand with respect to AI?

On the one hand, all 4 talk about it, here is the 3 other than CRWD:
ZS on AI:
OKTA on AI:…
PANW has a white paper on AI:…

On the other hand,

1/ in my 401k, I have to use ETFs. My favorite is called LRNZ which is concentrated and focused: 22 holdings in the AI/machine learning space.

They have had CRWD and ZS as 1-2 or 2-1 since founded less than 1 year ago. They have also owned OKTA. But no PANW.

2/ ARK is not very strong in SaaS, but they had CRWD and OKTA (may still own some) but no PANW.

3/ TMF has not recommended Palo Alto in a few years.

Cybersecurity ETFs are just indexing the space, so they are not representative.

In sum:

Aside from the short-term advantage of incumbent convenience, is there any technology that PANW can leverage to stay ahead of CRWD and ZS? Their absence from the only AI-focused active ETF seems significant to me.


Thanks for posting. Very informative.

One more metric to add is market cap

CRWD: $42B
PANW: $30B
ZS: $27B
OKTA: $24B

I was looking at the Gartner Magic Quadrant and it seems like they play in slightly different markets (Websecurity, Firewalls, Access Management, End Point protection etc.)


I would add a couple of thoughts here from a delivery perspective.

We are a PANW house.

We also use ZScaler.

Our process for new PANW devices (a key limitation) has a significant time delay. Every time we try to reconfigure or expand our system, we have to wait for the delivery cycle. Then we have to wait for the installation cycle. Then we have to get through the configuration cycle.

Now, my company is good at many things, however, we are NOT good at coordinating this value chain together.

The delays for us between identification and operation are on the order of weeks. (our last quote for shipping a new PANW enabled device was 10 days).

These logistics and physical installation issues are not a feature of ZScaler and CRWD. Once the process is in place, we only need a request to be put in place to enable.

We do not use OKTA and I have no direct experience with their products.

This difference in lead time from request to fulfill is a serious impediment. However, if the costs are not dissimilar, legacy equipment will not likely be changed out until it times out or until a complete value chain analysis is done. IT budgets do not typically have their own agendas with us. They are a frictional cost of compliance, not a savings center.

I written about this before for a couple of reasons. Even a superior product in time to deliver, install and operating costs and, end user performance still has to rise above the frictional costs of switching, culture and management attention among other priorities.

I’m long CRWD, OKTA and ZS. I have no position in PANW, however, I’m not sure how long (if ever) my company will switch away from the hardware model currently in place. This is significant to long term market place trends.

I agree with the statement that there is a long tail for all companies based on the “land grab” times that we are currently in. After all, these companies are still consuming market share from Cisco Systems.

We will not likely still be discussing these companies when this market matures.


PANW’s board during the past three years has granted the transfer of $350M of stockholder wealth to management…, page 66

even though combined net income is $(471)M.…, page 61

I’ll pass.


I written about this before for a couple of reasons. Even a superior product in time to deliver, install and operating costs and, end user performance still has to rise above the frictional costs of switching, culture and management attention among other priorities.

w.r.t. the point being made I would just like to mention that in the conference call the CEO repeatedly referred to the growing trend to abandon legacy technology and adopt cloud native technology with zero trust security.

The further point was emphatically made that those companies who delayed the process or stayed with their legacy operations would soon be unable to compete successfully;




The numbers do seem to present a compelling case for PANW. What I wonder about is the convergence of different IT domains. It seems like security and it operations seem to be merging. CRWD acquired Humio and I think the current valuation implies that it is going after markets beyond endpoint security. I don’t see how Okta’s business overlaps with PANW.

The closest comparison seems to be between ZS and PANW. And the valuation vs growth question is super interesting. ZS will need outsized growth for years if it wants to catch up with PANW and really makes me question whether ZS is a buy today.

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Agree with BobbyBe that OKTA is really not a competitor of the other companies mentioned . Rather it is more a complementary service/product.
“Okta is one trusted platform to secure every identity, from customers to your workforce” from OKTA home page
Partnering makes sense. Of course some of these other companies could make identity products like OKTA But why bother, since their main business has a higher TAM and appears to have higher growth possibilities?
OKTA sees to just chug along growing well but nothing very spectacular. Eventually almost all businesses will be using some form of advanced identity for everybody with access to their systems


Sorry - a little late to this thread but I’m cutting/pasting my response to the same post on the Crowdstrike board for those here…

For full disclosure, I own positions in CRWD and OKTA, but this makes me think
I should be at least making a purchase in PANW to cover my bases.

Hi Randy

I would not. I have seen this movie before - and probably so have you.

Once upon a time there was a market leader called Check Point and a young fast growing upstart called Palo Alto. I originally owned Check Point but switched my position into Palo Alto. A few years ago I switched my Palo Alto (and CyberArk and Fortinet) into Okta, Crowdstrike and ZS.

What happened then and what happens now have similar parallels.

  1. Check Point’s growth continued to decline from 10% to 5% levels despite becoming a profit machine and remaining a well run organisation.

  2. Palo Alto’s growth (~40% then) continued and overtook Check Point’s revenues and is now 80% larger in revenue base and growing at ~20% now

  3. Palo Alto’s growth continued to out grow Check Point’s growth rates by 2-4x and Check Point never reversed its growth decline.

  4. Check Point never fought back in terms of the technology advantage. The next generation stayed the next generation and the former once cyber security leader stayed the legacy technology solution.

I don’t expect this time to be any different.

Crowdstrike and ZS will take over the mantle as the new generation technology standard, continue to outgrow Palo Alto (by 2-4x) and overtake Palo Alto’s revenue position.

There’s no way I would be using Palo Alto as a hedge just as I didn’t use Check Point as one. You might consider ZS as a hedge in case Crowdstrike does hit a wall or suffer a breach or something but I would keep your investments in tomorrow’s technology leaders not yesterday’s.

(Crowdstrike is a ~10% holding for me, ZS is ~2% and Okta ~1%).