Cyber Security Comparisons

So for a number of quarters now I have put together a comparison of the 4 cyber security companies I follow. The intent was to compare them in market cap/size, earnings and sales and the corresponding growth rates and based on response it seems like many people are interested so I am updating again for the fall quarters. Since I started I have added a fifth, NET to the list due to the seemingly significant amount of cyber security revenue they get. I also have OTKA here and I understand it is not exactly in the same business. If nothing else you can see how the companies are growing and changing overtime since they all deal with internet security and are all SAAS type companies.

I started this because I am the tickerguide for PANW, and I thought it would be an interesting comparison since Palo Alto had seemed to be on the cheaper end of things compared to some of the newer, smaller companies. I recognize that the reason it is cheaper is because of both the overall growth rates 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. Now that I have done so for a while it seems good to check into progress for each company as well both in price change and business growth.

So, with that, here is the original…

A year ago June qtr…

                            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)    235M(calc)  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%
Mid July ’20  price          245        210     120       104 
Price/Sales                  6.5        30.1    31.4    26.3     
(Based on this year expectations)

**Here was last quarter’s data with NET added...**

                        PANW         OKTA      ZS      CRWD       NET
Revenues Qtr ($M)      1219.3        303.1    197.1    337.7     152.4
Revenue growth(yr/yr %) 34%          57%      57%       70%        53%
Non-GAAP Net Inc ($/sh)  1.60       -0.11     0.14     0.11     -0.02
Free Cash Flow ($M)  >365M(calc)     -4M      45M      73.6M    -9.8M
Adj FCF Margin          >30%         -1%      23%      22%        6%

 **And the latest quarter…** 

                         PANW        OKTA       ZS      CRWD       NET
Revenues Qtr ($M)        1247        351       230      380       172.3
Revenue growth(yr/yr %)   32%        62%       57%      63%        51%
Non-GAAP Net Inc ($/sh)  1.64      -0.07      0.14     0.17       0.00
Free Cash Flow ($M)    555M(calc)    33M       83M      123M     -39.7M
Adj FCF Margin            42%        10%       36%      32%       -23%

**Fiscal 2021 or 2022 expectations** 
Revenue- Mid    ($B)      6.7      1.276    1.005     1.43       0.6475
  % growth                22%        53%      43%      54%         47%

Price/Sales(sh pr used) 7.9($536) 27($221)  46($330) 33($208)  82($166)     
Sales based on this year expectations

**And now look at price changes…** 

3 months                16%       -16%      20%       -25%       37%
1 year                  84%         0%      144%      106%      159%

Interesting comparison. First off I should say that the forward expectations aren’t exactly perfect as both PANW and ZS just reported their first quarters and the other three are on a different calendar schedule and reported 3rd quarters. This is important in that expectations for the third quarter reports are already 75% in the books and are only predicting one quarter out and the other two predicting for 3 quarters of the year so P/S are skewed a little by being further out in time and less certain.

Second, looking at price changes, the results are interesting with PANW, ZS, and NET up over the last 3 months, but this is all skewed by the very recent results. Almost all of these have seen significant drops in the last few weeks. PANW is the only one that seems to have kept a fairly consistent upswing having only seen a 2 or 3% reduction in the last few weeks. The others have been hit much harder, but not too surprising in the “risk off” environment where the high flying high growth stocks have had a very quick, very short term pull back. The other interesting fact is that OKTA has been the only one that has not been a good investment over the longer (1 yr) term

Looking at the business results here from both the absolute values and percentage changes on both a qtr over qtr and year over year basis we also see great results across the board. I will only add a few comments and updates from the previous posts and leave any additional learnings to the reader or follow on posters.

Still the big dog here, more revenue than the other 4 combined and more than 3 times bigger than the next nearest competitor (CRWD). They do have significantly lower growth rates, and a corresponding lower enterprise value versus sales although the sales growth continues to grow nicely. On the plus size, they have very good earnings (for a SAAS company) and significantly higher free cash flow which gives them the opportunity to continue to improve their offerings to compete in the cloud based space that is the future. The other interesting point is that they now break out the Next Gen Security ARR, which take to be the cloud based security grew by over 70% last quarter. It is only a fraction of total sales but growing rapidly, (1.265B Annual recurring revenue ). The obvious question is whether the others growth rates will slow down before they get to PANW’s size and also whether they compete effectively in that cloud market. More on this later.

OKTA was starting to look better and growth this quarter was good both year over year and quarter over quarter. Earnings and Free Cash Flow were negative in this most recent quarter and enterprise value over price increased. Both of these probably due to the recent acquisition of Auth0 which seems to be key to continued future growth. Since OKTA seems to have it’s own niche in this market, its hard not to think they have a continued bright future despite the lower recent performance (stock price wise). But so far this has not played out well including the most recent quarter and market response.

ZS has clearly turned a corner here in the last year. Free cash flow is growing rapidly and earnings were positive. They are also the smallest of the 4 and pretty high enterprise value over price ( I am ignoring the outlier NET which I’ll discuss in a bit). Two quarters ago I said “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”, but clearly that has changed. Growth and FCF margins are actually a little better, but much higher EV/Pr. It still seems tough to pick ZS over CRWD at these prices today. (but no reason to not own both!)

Continues to put up great comparisons. It does seem that ZS results are comparable now as they are battling for growth leadership here. ZS a little better but smaller so tough to choose in my mind. The only real question is whether the numbers will hold up as they grow versus PANW for either CRWD or ZS. Which will lead me to talk about size in a bit.

New to this comparison and certainly no slouch. Revenue growth if looked at individually is great but actually not as good as some here. The only real concern I have is the Ent. Value over price is significantly above the others and has gotten significantly more expensive since last quarter. This is continued by the recent price appreciation (and this is after a major pullback recently). Perhaps this represents the larger TAM. NET is more than just Cyber security and continues to bundle more offerings to its customers. Perhaps the higher price shows the confidence level in its future growth. Perhaps it is due for an even further correction back to the rest of the group. I don’t know, but I have a hard time thinking I should sell any of the fairly significant position I have.

As I have done in the previous posts, let’s again talk size. Clearly Palo Alto is the big dog here with more revenue than the other 4 combined. Growth percentage is lower but on a much larger number and the cloud services are growing rapidly. The question to ask 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 company.

                                       PANW     OKTA     ZS     CRWD   NET
**Absolute Rev increase** (yr/yr)          301M     133M     87M    147M   58M

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 space growth. It seems that the upstarts are definitely catching up but the question is whether they will continue as they get bigger and with PANW’s recent revenue growth increase, this question becomes even more legitimate in my mind. It’s not an obvious thought but if this is really a 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 still had 70% more sales than the next largest.

I know that many have posted that the cloud services are just not as good. But one thought I have had 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 full switch to cloud services before the others can catch up?It seems like they are doing well based on the ARR basis. Does PANW have an advantage because they can cover both cloud and on-prem systems? I don’t know but since the price/sales ratio is 1/4 of the others while it is getting more absolute sales gains certainly makes me think. I really don’t know how to value the company when 75% of the company is growing albeit slowly (relative) and 25% is growing quite fast.

Another interesting aspect that comes out recently is that the bigger / better earning company holds up better in market downturns… whatever that is worth (your call here).

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. Now I really need to include ZS in that same category, 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, OKTA and NET, but this makes me think I should be considering ZS and PANW, especially if I don’t want to try to pick a winner here (as I am not always the best in doing so.)

Finally, this is certainly a very interesting industry that I don’t think should be ignored despite the recent downdrafts in the stock price of most of them, ie Better buying opportunity since the growth still seems to be there. If you don’t own any of these Cyber security stocks, this might be a great time to start a position.…

PANW Tickerguide. Long CRWD, OKTA, and NET for now.


Hi Randy.
Thank you for putting this together. A couple thoughts here.
First, the YoY for ZS is inaccurate. They clocked almost 62% YoY, not 57%.

The main part of my reply.
You posted the YoY dollars added per company and this shows PANW with the most, however, if you drill down to the QoQ, its a completely different story.

Despite the much smaller base, OKTA, CRWD & ZS are both growing faster in terms of actual dollars and NET is not far behind. Look at the QoQ actual dollars.
Note: OKTA isn’t all organic. I’m not sure what their organic dollars would be.

                PANW    OKTA    ZS      CRWD    NET
2 Qs ago        1219.3  303.1	197.1	337.7	152.4
Recent Q	1247	351	230.5	380.1	172.3
DOLLARS added	27.7	47.9	33.4	42.4	19.9

My takeaway… ZS, CRWD & NET dominating the incumbent competition.

long ZS & CRWD


OKTA has not been discussed much recently on this board until Randy’s post. I may be mistaken but I believe Saul owned it for awhile. I purchased more OKTA last spring and am basically flat for the year (even with the current pullback). I sold OKTA upon the auth0 acquisition. After investigation, I bought OKTA back. auth0 brings a whole new dimension to their business that being intra-enterprise authentication federation. I can only assume they have a good integration of auth0 with the core OKTA service. It seems to be selling very well. I used OKTA for 3 years at my last company and consulted with integration between Workday and Active Directory/LDAP. The service is very good and implementation is very sticky. Every month this year I have looked at selling OKTA and after re-analysis, each time I did not sell (to buy other better performing stocks). OKTA clearly has not performed as a stock, but has performed very well as a company. OKTA is probably a bargain using the criteria on Saul’s board. And it has accelerating revenue the last 2 quarters (+60% YOY). I am looking to dive a little deeper and probably add some OKTA with this pullback. I do believe long term the market is a weighing machine.

Here is a SA article on OKTA from this morning. It includes some references to ZS and CRWD. I am not too concerned with the OKTA drop in operating margins and higher expenses and stock compensation. This is all to be expected from the auth0 acquisition and should subside. I am looking for the organic growth without auth0 but does not appear reported. Next year’s guidance points to 37% YOY of revenue growth which is a little soft for my ears. But Q4 2021 should be another repeat from Q3.

Okta Q3 2022 Results: Strong Report With One Small Blemish
Dec. 02, 2021 3:49 AM ET Okta, Inc. (OKTA)
Putting aside the share price volatility of late, Okta’s results were nothing short of astonishing.
Management has chosen not to disclose too many granular details pertaining to Auth0, but even with that insight aside, we saw Q3 2021 topline grow by 61% y/y.
It’s now difficult to argue that Okta is too expensive.…



“however, if you drill down to the QoQ, its a completely different story…My takeaway ZS, CRWD & NET dominating the incumbent competition”

In this case YoY is better since the companies presumably have different sales cycles. PANW grows the slowest Q2 to Q3 (often negative QoQ growth). In contrast, PANW brought in 145m incrementally from Q1 to Q2 compared to 19m for ZS. The data supports the conclusions in the original post IMO.


Randy, as you know, Palo Alto is a mostly hardware company and therefore has a harder time growing and is facing fierce competition from the SaaS companies.

Anecdotally, we started building an on-premise zero-trust architecture for our Gov customer because the nature of the program disallowed connectivity to the cloud (otherwise we probably would use Zscaler + Okta like my company does for its corporate self). I don’t know what ZScaler costs, but PA was crazy. Even though it was mostly hardware, they have moved to a subscription model for all the security software that is built into the device. This means that the costs is the same each year instead of high the first year, then smaller maintenance fees going forward. Somehow our engineers missed this and when the yearly maint bill came in our customer did a spit-take because they did not have the money set aside. We have postponed the project, but hope to get back on track.

What’s my point? PA has its place, but is hardware heavy and may never be able to compete with the pure SaaS companies that are nipping at its big heals. I predict they will become like Cisco, who is still huge, but grows slowly and changes slowly.

We know we would not buy it on this board, but I would not want to buy it for any portfolio.



Thanks for the replies to my post. And at the start I want to say I am not trying to change anyone’s mind about what to own. It is more a study of interest to me as I think it is pretty interesting to compare a few of these, especially PANW, ZS, and CRWD as they seem to be more direct competitors.

And before someone replies, I clearly understand the difference between PANW and the other two, the traditional fire-walled hardware portion of this business is both why the company is not growing as fast and maybe, perhaps will be the reason it continues to grow.

So let me throw out a few more numbers. Here are the last 5 quarterly revenues and ARR. I had noticed in their most recent presentation that they are breaking out the cloud related SAAS revenues which allows us to do some comparisons.

                           '21            '22
                  Q1    Q2    Q3    Q4     Q1     Yr/Yr
Revenues ($M)    946   1017  1074  1219   1247     32%
ARR ($M)         719    840   973  1180   1265     76%  

As a comparison, in their most recent qtr, CRWD reported their ARR as being 1.51B and 67% growth. Seems pretty dang similar to me (faster for PANW!?!). And yes, as another poster suggested, the Q4 to Q1 numbers have a seasonality to them that you don’t want to get too caught up in that.

So what do we make of this. We have a company that is growing their SAAS portion very fast and their hardware portion slowly. And not surprisingly, the overall price of PANW is about 1/4 on an EV/PR basis. But even more interestingly, the total valuation (Market Cap) is $45B for CRWD and $51B for PANW. So in essence you are paying very little for the hardware business. I guess the question is how much is the slower hardware business worth and do you want to dilute your ownership by owning the hardware portion.

But having said all of that, the bigger question is whether PANW is catching up on the cloud services. A number people have said anecdotally that CRWD and ZS are killing. The numbers don’t seem to say that. And I will say again that the incumbent does have an advantage if they recognize the changes and adapt.

I have no answers though… just an interesting comparison. One final point, the market seems to like PANW a bit better recently. Perhaps it is just less risk. Who knows.

Me, I still don’t own any PANW but sure wish I would have spread some of my CRWD and NET investments into PANW a few weeks ago.

PANW Tickerguide and Long CRWD, OKTA, and NET.


Hi Randy,

Thanks for breaking out ARR for Palo Alto’s Cloud related Saas revenues.

When you said in your last post on this thread, I will say again that the incumbent does have an advantage if they recognize the changes and adapt. I will agree that when selling into an installed base that there are significant advantages when compared to selling into any other segment of the market. And Palo Alto does have a huge installed base. Did I miss in you argument where you addressed how this limit (the limit being the installed base) in Palo Alto’s growth for ‘Cloud related Saas revenues’ is going to be overcome when reached? What is there greenfield win rate? I just haven’t been able to find this anywhere.



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Hi Jason,
You definitely didn’t miss it and it is a good question.

I have not seen it anywhere in their quarterly presentations. I assume you mean, are they winning orders from companies that don’t have a firewalled system? It is a good question.

Taking the opposite side, I wonder if there are really many companies that don’t have any firewalled systems? I really don’t know. Not trying to make any statement. I am still a little surprised at the growth rate of the SAAS portion, I wouldn’t have guessed it was so good.

Sorry I can’t help more here.