What’s Palo Alto’s Value Proposition in the Cybersecurity Space?



Palo Alto’s scale in the cybersecurity space

In this part of the series, we’ll look at Palo Alto Networks’ value proposition among select US cybersecurity companies.

As of August 30, 2016, and as the following graph shows, Cisco (CSCO) continued to be the largest global player by market capitalization in the security space. Cisco is considered a leader in the overall security appliance market. Symantec (SYMC), Palo Alto Networks (PANW), FireEye, Barracuda (CUDA), and Fortinet (FTNT) are some of the other leading players in this space.

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Enterprise value multiples

Now let’s look at Palo Alto’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple. We’ll also look at other US cybersecurity players’ multiples.

Palo Alto’s forward EV-to-EBITDA multiple was ~43.4x. Cisco’s EV-to-EBITDA multiple was ~6.83x, while Fortinet’s EV-to-EBITDA multiple was 22.24x on August 30, 2016. Currently, FireEye has a negative EBITDA. This is why we didn’t include it here.

Dividend yields

Cisco’s forward annual dividend yield was ~3.3% as of August 30, 2016. This was higher than Symantec’s forward annual dividend yield at ~1.3%. Most of the companies in the cybersecurity space are relatively new, which is why most of them don’t pay dividends—including Palo Alto Networks, FireEye, and Fortinet. In the final part of our series, we’ll see what kind of recommendations analysts are giving Palo Alto Networks.


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