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How Palo Alto Networks Stock Has Performed

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May. 7 2019, Updated 9:25 a.m. ET

Stock returns

In this series, we’ll look at the performance of cybersecurity stocks since the start of April 2019. Palo Alto Networks stock (PANW) has gained just over 3% since the start of April. The stock though is up by an impressive 33% this year. In comparison, the Prime Cyber Security ETF (HACK) has gained 24% this year.

Palo Alto Networks’ investors have had a stellar run over the past few years. The stock has gained 84.5% in the last three years and 303% in the last five years. Palo Alto Networks stock is currently trading at $250.77, which is 57% above its 52-week low of $160.08 and 3.4% below its 52-week high of $260.63.

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Is Palo Alto stock trading at an attractive valuation?

Palo Alto stock has a compound annual growth rate (or CAGR) of 32% in the last five years. In comparison, the company’s EPS rose at a CAGR of 71% in the last five years. Does PANW stock still have upside potential? Is it trading at a premium or a discount?

PANW is trading at a forward PE multiple of 43.7x for 2019 and at 86.61x for 2020. In comparison, the company’s earnings are estimated to rise by 37% in 2019 and then gain 17.3% in 2020, which suggests that the stock is overvalued at the 2019 multiple. Its earnings are estimated to grow at a CAGR of 27% in the next five years, while sales could rise by 21% annually over the next three years.

Out of 41 analysts covering PANW, 29 recommend a “buy,” and ten recommend a “hold.” There are two “sell” recommendations. The average 12-month price target for PANW is $279.91, indicating the stock is trading at a discount of 12% to average estimates.

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