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FireEye’s Value Proposition in the Cybersecurity Space



FireEye’s scale in the cybersecurity space

So far in this series, we’ve looked at the factors that have impacted FireEye (FEYE) despite its active role in the rapidly growing cybersecurity space. In this part, we’ll look at FireEye’s value proposition among select US cybersecurity companies.

On November 29, 2016, Cisco Systems (CSCO) was the largest global player by market capitalization in the security space. Cisco Systems (CSCO) is considered a leader in the overall security appliance market. Symantec (SYMC), Palo Alto Networks (PANW), FireEye, Barracuda (CUDA), and Fortinet (FTNT) join Cisco at the top of the cybersecurity space.
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FireEye’s enterprise value multiples

Now, let’s look at the EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiples of FireEye’s peers. FireEye has negative EBITDA, which is why we haven’t included it here.

The forward EV-to-EBITDA multiple for Palo Alto Networks stood at ~21.4x. Cisco Systems had a multiple of ~6.6x, and Fortinet had a multiple of 15.6x on November 29, 2016.

FireEye’s dividend yield

Cisco Systems’s forward annual dividend yield was ~3.5% on November 29, 2016, which was higher than Symantec’s forward annual dividend yield of ~1.2%. Most of the companies in the cybersecurity space are relatively new, which is why most of them don’t pay dividends. These companies include Palo Alto Networks, FireEye, and Fortinet.

Investors who want to gain diversified exposure to Cisco could consider the PowerShares QQQ ETF (QQQ). QQQ invests ~2.7% of its holdings in Cisco and has an ~28.4% exposure to application software.

In the final part of our series, we’ll see what analysts recommend for FireEye.


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