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Bull of the Day: Qualys, Inc. (QLYS)

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Shares of Qualys, Inc. (QLYS - Free Report) have been on a roller coaster ride over the last 12 months, including a big one-day drop Monday. Despite the recent turbulence, the cloud-based IT security and compliance solutions firm’s stock is up big over the last several years and Qualys looks poised to grow both its top and bottom lines going forward.

Overview  

Qualys’ pitch to potential customers is simple. The firm boasts that it offers “a single cloud platform for IT, security and compliance across” all of a company’s “global IT assets.” The firm’s cloud-based platform and its integrated cloud apps provide business critical security intelligence continuously, which allows Qualys’ clients the chance to automate “auditing, compliance and protection for IT systems and web applications on premises, on endpoints and elastic clouds.”

The Foster City, California-based company was one of the first security firms to operate a Software-as-a-Service model. This has become widely popular across the tech industry today, from Salesforce (CRM - Free Report) to more consumer-facing companies like Netflix (NFLX - Free Report) and Uber (UBER - Free Report) . Qualys has strategic partnerships with some well-known consulting giants and managed service providers like Accenture and IBM (IBM - Free Report) and currently has over 12,200 customers around the world.

Cybersecurity concerns are set to expand as the world becomes ever-more digitized and connected. In fact, roughly $600 billion, or nearly 1% of global GDP, is expected to be lost to cybercrime every year, based on a 2018 study by The Center for Strategic and International Studies and global computer security firm McAfee.

Qualys is coming off top and bottom line beats in Q1 fiscal 2019. And as we mentioned at the top, shares of QLYS have outperformed over the last serval years. Qualys is up 154% in the last three years and 93% over the past 24 months, which blows away the Security Market’s 31% average climb and the S&P 500’s 12% jump.

 

 

Outlook & Earnings Trends

Looking ahead, our current Zacks Consensus Estimate calls for the company’s second-quarter revenue to pop roughly 15.2% from the prior-year quarter to reach $78.5 million. This would mark a slight slowdown from Q1’s 16% top-line expansion. With that said, the company’s full-year fiscal 2019 revenue is projected to jump 15.4% to hit $321.9 million. Peeking further ahead, Qualys is expected to see its full-year 2020 revenue surge 16% above our current-year estimate, in a sign of solid and stable sales growth.

At the bottom end of the income statement, the security provider is expected to see its adjusted second-quarter earnings soar 20.5% from the year-ago period to touch $0.47 per share. Last quarter, QLYS crushed our earnings estimate by 16.7% to post adjusted earnings of $0.49, which marked a 36% climb. Meanwhile, the company’s adjusted full-year EPS figure is projected to pop 10.3%. Plus, Qualys’ 2020 earnings are projected to come in 14.6% higher than our current-year estimate.

Qualys has topped our quarterly earnings estimate for several years now. This includes a 21.1% average beat over the trailing four periods. Investors will also notice that Qualys’ earnings estimate revision picture has trended heavily upward recently, especially for fiscal 2019 and 2020. The firm’s positive earnings estimate revision activity has helped lift its overall consensus estimates for both the current and following fiscal year, which means at least some analysts are more optimistic about Qualys’ earnings growth.

 

 

Bottom Line

Qualys’ longer-term earnings revision trends help the firm earn a Zacks Rank #1 (Strong Buy) at the moment. The firm also rocks a “B” grade for Growth in our Style Scores system. Value investors might not love QLYS right now as its price/sales ratio rests a 12.2, which comes in well-above its industry’s 6.9 average.

The company is also trading at 61.7 forward 12-month Zacks Consensus EPS estimates. But this falls almost nearly in line with the Security Market average. This group includes Cyberark Software (CYBR - Free Report) , FireEye (FEYE - Free Report) , and more. In the end, Qualys looks like a stock for growth-minded investors to consider right now that is part of an industry that is likely to become even more vital.

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