Qualys (Qlys) is network security company with a growth rate of 21% and profit margin of 17% (slightly less than the 40 threshold for a SaaS company), but trading at just 11 x revenues, a steep discount to where similar companies (e.g., ZS) are trading. Another plus, it is already profitable with no debt. Opinion?


QLYS does not directly compete with ZS. QLYS does Vulnerability Management and directly competes with Tenable Holdings (TENB).

As you mention, QLYS is solidly profitable and growing revenue about 20% per quarter. TENB is growing much faster but is not expected to be profitable this year or next year.

Some numbers…

        			QLYS		TENB
Market Cap			2.9B		2.0B
Revenue (TTM)			267M		246M
Price/Sales			12X		8X
Forward P/E			42X		NM

NM - Not Meaningful

% YOY Revenue Growth

2017			QLYS		TENB
Q1			18		58
Q2			14		53
Q3			17		45
Q4			20		50
Q1			22		46
Q2			23		44
Q3			21		42
Q4			18*		35*

* - Guidance
I was unable to find a Gartner graph to position the companies in Vulnerability Management space.

Both companies have been reviewed in Seeking Alpha during in recent months:
QLYS: ([https://seekingalpha.com/article/4218125-qualys-still-remain...](https://seekingalpha.com/article/4218125-qualys-still-remains-long-term-fighter-taking-beating-lately))
TENB: ([https://seekingalpha.com/article/4218928-tenable-holdings-we...](https://seekingalpha.com/article/4218928-tenable-holdings-weakness-metrics-offset-lower-valuation))

I recently took an opening position in TENB below the IPO price of $23.00.  I will continue to follow QLYS.  Which do you think is the better buy?



Hi, Ross-

I evaluated QLYS again based on its the growth and gross margin and found that it is fully valued at P/S=12. TENB’s hypothetical P/S > 12 assuming a growth rate of 35%. So, TENB is certainly more attractive at current value in the low 20s.
However, I did note that QLYS appears to have an upward trending growth, while TENB’s growth is trending downward. In addition, the Seeking Alpha articles mentioned “QYLS” as a leader, while the other article on TENB did not.

For SaaS stock, a sustained growth rate is the key. A decreasing trend is a concern. Just my 2 cents.


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