How Secure Are Security Stocks?

Michael Teague |

Yesterday, prosecutors in New Jersey indicted 5 men who played important roles in a global financial hacking ring.

The vast criminal enterprise spanned a period of at least 7 years, a period of time during which the hi-tech thieves absconded with over 160 million credit and debit card numbers, and managed to extract a profit of some $300 million dollars or more.

Though the whole event is thought to be the largest fraud case of its kind, the notion of identity theft is by no means a foreign one in this day and age. The average consumer sitting in front of her or his computer knows, for the most part, that strange emails should not be opened, and sensitive information should be sent out over the web only with the greatest circumspection. Indeed, identity theft can have some very nasty consequences that include but are not limited to one’s savings being removed directly from one’s account in the blink of an eye.

The following 5 small, mid, and large-cap stocks were selected from the software and security services industry, part of the technology sector, because each one plays at least a potential role in cyber safety, whether from the standpoint of individual consumers, or the businesses and networks that serve them.

Being that these are tech stocks, they were also selected based on the following criteria: a low long term debt-to-equity ratio (less than 5), high gross margins (greater than 50 percent), and positive year-to-date performance. Tech companies in general are in a much stronger position when funded mostly by equity rather than debt, making a low ratio preferable. Higher gross margins are important for techs because it indicates that the company’s products are bringing in adequate returns that can then be reinvested into more research and development.

Symantec Corporation (SYMC) – The Mountain View, California company has a market cap of $16.81 billion, and offers security products for a wide array of clients ranging from personal PC and laptop users with the ubiquitous Norton antivirus program, to enterprise and business with encryption, data loss prevention,  and cloud and mobile security. Symantec’s gross margin is currently at 83 percent, and the company has a long term debt-equity ratio of 0.39. Shares are trading for $24.25, up 30 percent in 2013.



Sourcefire Inc. (FIRE) – The Columbia, Maryland company has a market cap of $2.32 billion, and has just finalized a merger deal with Cisco Systems (CSCO) . Like Symantec, Sourcefire makes software for personal and network use, and counts a number of business and government sectors among its clients. The company has a 76.7 percent gross margin, and a long term debt-equity ratio of 0. Shares are trading at $75.61, up 60 percent on the year.

Brady Corp. (BRC) – The Milwaukee, Wisconsin company specializes in a number of products and services, particularly identification verification equipment. Brady’s market cap is $1.72 billion, with a gross margin of 51.5 percent, and a long term debt-equity ratio of 0.12. Shares are trading at $33.47, up 2 percent year-to-date.

IntraLinks Holdings Inc. (IL) – Headquartered in New York City, the $540.9 million company’s website boasts some 80 percent of the global Fortune 1000 companies among its clients, who include financial services, life sciences, tech, and manufacturing firms. IntraLinks has a gross margin of 72 percent, with a long term debt-equity ratio of 0.23. Shares are trading at $9.85, up nearly 60 percent so far this year.

VASCO Data Security International Inc. (VDSI) – The Chicago, Illinois company has a market cap of $319.17 million, and is a world leader in authentication and e-signature software, and provides services for a number of public and private concerns, including banks, healthcare companies, and education. VASCO’s gross margin is 64 percent, and the company’s long term debt-equity ratio is 0. Shares are trading for $8.25, up 1.1 percent year-to-date.

ManTech International Corporation (MANT) – The $1.08 billion company based in Fairfax, Virgina provides security services for information technology companies, as well as the intelligence and healthcare industries. The majority of its clients can be found in government, and particularly the defense sector. Though ManTech’s gross margin is only 14 percent, the company gets an honorable mention because it has a long term debt-equity ratio of 0.17, and with shares trading at $29.10 is up 14 percent on the year.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
IL IntraLinks Holdings Inc. $0.001 par value n/a n/a n/a 0 Trade
SYMC Symantec Corporation 29.58 0.56 1.93 8,235,789 Trade
MANT ManTech International Corporation 38.24 0.29 0.76 96,807 Trade
VDSI VASCO Data Security International Inc. 14.25 0.30 2.15 102,018 Trade
BRC Brady Corporation 37.30 0.15 0.40 107,560 Trade
HPTG Hydrophi Technologies Group Inc 0.00 0.00 0.00 0

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