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5 Cyber Security Stocks for a Winning Portfolio in 2017

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Cyber security software providers are anticipating the year 2017 to be an eventful one, as enterprises and government agencies aim at tightening their security loopholes amid growing cyber attacks.

Numerous data breaches at high profile business houses and government agencies have demonstrated the current vulnerable state of the cyber security systems. Even the U.S. presidential election campaigns have not been free from hacking scandals and data breaches.

Cybersecurity threats are anticipated to intensify in the New Year due to growing proliferation of cloud computing, Internet of things (IoT) and Bring Your Own Device (BYOD) trends. Increasing interconnectivity between different devices makes the whole system vulnerable if any one of the nodes gets affected by Distributed Denial of Service (DDoS) attacks.

Moreover, prevalence of open source as standard for infrastructure software has aggravated the cybersecurity threats. Further, growing incidence of Ransomware is a major headwind for cybersecurity providers.

Higher Spending Presents Growth Opportunity

Despite being blamed for its sluggish actions, the U.S. federal government’s cyber security funding is one of the largest in the world. Per the Cybersecurity National Action Plan (CNAP) published in Feb, 2016, the spending on cyber security is expected to reach $19 billion for fiscal 2017.

Under President-elect Donald Trump, the current spending figure has every chance to increase as state-sponsored threats from Russia and China continue to impact the U.S. government and businesses.

According to Morgan Stanley “For large enterprises, security breaches can result in tens of millions of dollars in losses, both direct and indirect. When small companies are hacked, the damage can be irreparable. A National Cyber Security Alliance study found that 60% of small businesses close their doors within six months of a data breach.”

Morgan Stanley expects cyber security products and services market to surpass $60 billion in 2016 and double by 2020. Per Markets and Markets, the cyber security market is estimated to grow at CAGR of 10.6% from $122.45 billion in 2016 to $202.36 billion by 2021.

According to market research firm IDC, the hot areas for growth are security analytics, threat intelligence, mobile security,and cloud security. Per Gartner, worldwide spending on IoT is anticipated to reach $348 million this year and will climb to $434 million in 2017. According to Trend Micro, Ransomware will grow at 25% in 2017.

Our Picks

Higher spending and growing demand for cyber security products is expected to boost returns for cyber security stocks in 2017. Here we focus on five such stocks that have a favorable combination of Zacks Rank #1 (Strong Buy) or #2 (Buy) and VGM Score of ‘A’ or ‘B’. Our research shows that this favorable combination offers the best upside potential.

Booz Allen Hamilton Holding Corporation BAH – The stock has a Zacks Rank #2 and VGM score of ‘A.’ The company has beaten earnings estimates in all of the trailing four quarters, the average positive surprise being 3.51%. Earnings estimate for fiscal 2017 increased 1.2% (2 cents) to $1.75 per share in the last 60 days, reflecting year-over-year growth of 4.6%. Looking for the Best Stocks for 2017? Be among the first to see our Top Ten Stocks for 2017 portfolio here.
 

BOOZ ALLEN HMLT Price and Consensus

 

BOOZ ALLEN HMLT Price and Consensus | BOOZ ALLEN HMLT Quote

Science Applications International Corporation SAIC – The stock has a Zacks Rank #2 and VGM score of ‘A.’ The company has beaten earnings estimates in all of the trailing four quarters, the average positive surprise being 9.20%. Earnings estimate for fiscal 2017 increased 1.8% (6 cents) to $3.36 per share in the last 60 days, reflecting year-over-year growth of 4.6%.
 

SCIENCE APP INT Price and Consensus

 

SCIENCE APP INT Price and Consensus | SCIENCE APP INT Quote

VASCO Data Security International Inc. VDSI – This stock also has a Zacks Rank #2 and VGM score of ‘A.’ The company has beaten earnings estimates thrice in the trailing four quarters, the average positive surprise being 97.86%. Earnings estimate for fiscal 2017 increased 19% (8 cents) to 50 cents per share in the last 60 days.
 

VASCO DATA SEC Price and Consensus

 

VASCO DATA SEC Price and Consensus | VASCO DATA SEC Quote

Leidos Holdings Inc. LDOS - The stock has a VGM score of ‘B’ and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

The company has beaten earnings estimates thrice in the trailing four quarters, the average positive surprise being 12.20%. Earnings estimate for fiscal 2017 is currently pegged at $3.15, which reflects year-over-year growth of 44.2%.
 

LEIDOS HOLDINGS Price and Consensus

 

LEIDOS HOLDINGS Price and Consensus | LEIDOS HOLDINGS Quote

VeriSign Inc. (VRSN - Free Report) – This stock also has a Zacks Rank #2 and VGM score of ‘B.’ The company has posted an average positive surprise being 5.06% in the trailing four quarters. Earnings estimate for fiscal 2017 increased 3.8% (13 cents) to $3.56 per share in the last 60 days, reflecting year-over-year growth of 7.5%.
 

VERISIGN INC Price and Consensus

 

VERISIGN INC Price and Consensus | VERISIGN INC Quote

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