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.
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 2018 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? 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.