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PALO ALTO: YOUR VALUATION AFTER BUYING ZINGBOX


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BY : Diego GutiérrezOctober Fri, 2019

In an environment where businesses are deploying more and more smart devices and sensors connected to the internet, there is a need to strengthen the security of the Internet of Things (IoT).

Zingbox operates in precisely this field, and will enable Palo Alto to strengthen its protection for the various products and services it offers.

MEETING PALO ALTO NETWORKS

Palo Alto Networks is a world's leading American cyber security company. Since its founding in 2005, the company has pursued a strategy focused on network security and, in particular, next-generation firewalls.

It aims to provide your employees with all the information and protection they need to carry out their daily activities, without compromising company information.

To achieve this, it focuses on three main areas:

  • Secure the EnterpriseFocused on preventing attacks on the corporate network through the use of firewalls, endpoint protection, prevention measures and the use of 5G and IoT networks.
  • Secure the CloudProtection: offers protection in the public cloud, on SaaS or mobile devices.
  • Secure the FutureArtificial Intelligence-based security platform that is constantly evolving and developing to stop today's most sophisticated attacks and threats.

Therefore, it offers solutions to prevent breaches and provide its customers with useful information about threats detected in all security functions of the system, as well as having the ability to analyse malware on any port, application or hardware thanks to its unique technology.

Its clients include companies such as Toyota, OCBC or Sega.

PALO ALTO'S LATEST ACQUISITIONS

Aware of the importance that IoT is taking on in all areas and sectors, Palo Alto has sought to strengthen its capabilities in this field through the buy from Zingbox.

This start-up was founded in 2014, and allows it to strengthen its IoT security services, giving its customers the ability to gain control, visibility and security for their connected devices at scale. This is according to CEO Nikesh Arora.

The operation has been closed at around $75M.

This is the company's fourth acquisition so far this year. The rest of the acquisitions have been made by:

  • Demisto ($560M): a company founded in 2015 by four McAfee executives, dedicated to developing automation tools for IT security management.
  • Twistlock ($410M): Provides vulnerability management, compliance and run-time defence for cloud-native applications and workloads.
  • PureSec (undisclosed numbers): provides end-to-end security for serverless functions, covering vulnerability, access permissions and run-time threat management.

VALUATION OF PALO ALTO

The firm is very active in corporate finance, so it is advisable to analyse its economic and financial situation and its future prospects.

FINANCIAL ANALYSIS

PALO ALTO: YOUR VALUATION AFTER BUYING ZINGBOX

PALO ALTO: YOUR VALUATION AFTER BUYING ZINGBOX

According to analysis and projections conducted by Bloomberg Intelligence, by expanding its market share from 5.8% to a projected 8%, Palo Alto should be able to reach $4 billion in annual sales, up from $2 billion in 2008.

With its sales momentum and recent acquisitions adding to and strengthening its product offering, its new customers will make a greater contribution than existing ones.

In addition, its ongoing efforts to strengthen and constantly improve its product offering, together with the acquisitions made and expected to continue in the future, will help to strengthen its competitive position vis-à-vis competitors such as Cisco, Symantec or FireEye.

There is a change of trend in EBITDA and EBIT, which after several years in negative figures have reversed this trend and are currently in positive values that are expected to be maintained and grow in the future.

Net profit and ROE should turn positive in future years, once sales increase and the company's operating expenses stabilise.

Of particular relevance is the strong growth in assets. Most of it comes from cash, which indicates a good position for future acquisitions and a strong position to face possible liquidity needs.

On the financing side, there was an increase in equity, due to the issuance of new shares.

The increase in borrowed funds is in line with the company's growth, which does not raise any alarm bells.

MULTIPLES AND QUOTATION

PALO ALTO: YOUR VALUATION AFTER BUYING ZINGBOX

Palo Alto's multiples are well above the sector average, although below the historical average.

This strong valuation compared to its comparables can be understood by the strong growth in sales that the company has been experiencing in recent years, as well as by its good future prospects.

PALO ALTO: YOUR VALUATION AFTER BUYING ZINGBOX

As can be seen in the share price, after strong growth in the first months of the year, following the general market trend, the share price has remained flat in recent months.

The company's strong future prospects, the strategic acquisitions it has made and a valuation multiple below its historical average seem to indicate the possibility of a revaluation in Palo Alto Networks shares.

 

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