Want to get richer? 2 Unstoppable Growth Stocks to Buy Now and Hold
Cybercrime is on the rise, and trends such as cloud computing, remote working, and digital transformation are exposing new vulnerabilities in business defenses. Thanks to ransomware-as-a-service organizations, even inexperienced hackers can get their hands on sophisticated tools. In fact, ransomware-related data leaks increased by 82% in 2021 and hackers increased their ransom demands by 36%.
In short, cybercrime is an increasingly costly problem, with damages expected to reach $10.5 trillion per year by 2025, up from $3 trillion in 2015, according to Cybersecurity Ventures. It’s no surprise that enterprise security and IT teams are focused on implementing effective defenses, and Z-scale ( ZS -6.83% ) and Okta (OKTA -5.70% ) are well positioned to take advantage of this trend.
Here’s what you need to know.
Zscaler specializes in network security. Its cloud platform – a Secure Access Service Edge (SASE) – spans 150 global data centers, acting as a checkpoint where web traffic is inspected and business policies are enforced. In doing so, Zscaler accelerates and secures employee access to critical applications and infrastructure, allowing users to connect to corporate resources (and the open internet) from any device or location.
More importantly, as the largest security cloud, Zscaler has achieved significant scale. Its platform inspects more than 210 billion web transactions per day and relies on artificial intelligence to identify and prevent attacks. This results in a network effect, with each client bringing more security signals to the platform. When a new threat is identified, Zscaler can block it instantly across its entire ecosystem, meaning every additional customer creates value for every customer on the platform.
Research company Gartner recently named Zscaler an industry leader, citing greater execution capability than any of its rivals. Best of all, this marks the 11th consecutive year that Zscaler has been recognized as the best-in-class solution. Unsurprisingly, these accolades have been accompanied by impressive financial results. Over the past year, revenue grew 60% to $859.6 million and free cash flow jumped 145% to $196.3 million.
Looking ahead, Zscaler can maintain this momentum. The company estimates its addressable market at $72 billion, but management sees room to increase that number by targeting small businesses, additional cloud workloads and Internet of Things workloads. More broadly, businesses that want to thrive need to protect their sensitive data while providing employees with a great digital experience, and Zscaler makes it possible. This is why I intend to keep this unstoppable growth stock forever.
Okta specializes in identity and access management (IAM), a branch of cybersecurity that aims to securely connect the right people to the right technologies at the right time. Its platform integrates with more than 7,000 application and infrastructure providers, enabling customers to apply contextual access policies based on user identity, network, device and location. ‘an user. Additionally, Okta leverages artificial intelligence to identify the risk associated with each login event, creating a network effect that makes its predictive engine more accurate over time.
Two of Okta’s greatest strengths are its breadth and platform independence. Okta provides solutions for customer identity and workforce identity, and its software is not tied to any specific infrastructure vendor. This differentiates the company from Microsoft, which offers its own Azure Active Directory (IAM) product. Most important, Forrester Research recently recognized Okta as the industry leader, citing a stronger current offering and growth strategy than any rival.
Over the past year, Okta has achieved impressive financial performance. Its customer count jumped 50% to 15,000, and the average customer spent 24% more, a testament to its platform’s stickiness. As a result, revenue increased 56% to $1.3 billion and the company generated $87 billion in free cash flow (FCF). To be clear, FCF fell 22% from the prior year, partly due to expenses associated with the acquisition of Auth0, but more so because management is aggressively investing in growth.
Example: In 2021, Okta announced two new products: Identity Governance and Privileged Access. The former helps customers meet compliance requirements and automate identity workflows, while the latter helps customers secure privileged accounts (i.e. those with access to sensitive data). Both products are expected to launch in 2022, making Okta’s portfolio even stronger.
To that end, management values its addressable market at $80 billion, leaving a long streak for growth. And with the stock trading at 19.5 times sales – below its five-year average of 25 times sales – now seems like a good time to buy some stocks.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.