The stock cost of cloud safety enterprise Zscaler Inc. (NASDAQ:ZS) skyrocketed additional than 29% on Friday to trade at $ninety eight per share following the company’s newest earnings results.

Zscaler smashed analysts’ expectations on profits and earnings. Non-GAAP earnings of seven cents per share outperformed Zacks consensus estimate of two cents and profits conquer forecasts by three.85%.

The enterprise supplies net entry methods to prospects globally that connect them to externally managed applications this sort of as SaaS. It also gives non-public entry methods to offer entry to internally managed applications hosted in data facilities or in non-public and general public clouds.

Zscaler’s products and solutions have witnessed a ramp-up in demand from customers following the coronavirus pandemic as additional corporations and institutions change operations to distant networks. Chairman and CEO Jay Chaudhry reported in a press launch that “the mitigation functions taken by each organization in reaction to the COVID-19 pandemic developed an instant need for solid safety and entry to the net and enterprise applications, all whilst functioning from anyplace.”

Highlights from the 3rd-quarter results

For the quarter, Zscaler claimed a forty% increase in profits from the prior-12 months quarter to $a hundred and ten.5 million. Full billings for the period of time scaled 55% higher to $131.three million, whilst non-GAAP web revenue came in at $9 million, or earnings of seven earnings per share, up from $seven.four million, or 5 cents per share, final 12 months.

The company’s hard cash and hard cash equivalents as of April thirty stood at $391.three million. This provides Zscaler the flexibility it desires amid the coronavirus pandemic.

It lately built some key acquisitions in a bid to strengthen its grip on the net safety enterprise. In April, the San Jose, California-based mostly enterprise obtained Cloudneeti Corp., a cloud safety posture management enterprise specializing on SaaS, IaaS and PaaS applications.

In May perhaps, it obtained Edgewise Networks, one particular of the major gamers in application-to-application communications safety for general public clouds and data facilities. The enterprise is strategically positioned to capitalize on the opportunity developed by the fast increase in distant functioning amid the coronavirus lockdown.

Zscaler expects to submit earnings of 20 cents to 21 cents per share on profits of $422 million to $424 million for whole fiscal 2020. In the fourth quarter, earnings are anticipated to be two cents to three cents per share on $117 million to $119 million in gross sales.

Valuation

Froma valuation standpoint, shares of Zscaler appear to be somewhat high priced compared to its rivals. The enterprise trades at a ahead cost-earnings ratio of 333 and a cost-earnings to expansion ratio (five-12 months anticipated) of seven.13. Its cost-gross sales ratio of 26.68 is also somewhat higher compared to its peers.

For occasion, Palo Alto Networks Inc. (NYSE:PANW) is at the moment valued at a ahead cost-earnings ratio of forty.three. Its PEG ratio stands at two.46, whilst the gross sales a number of is six.86. On the other hand, Fortinet Inc. (NASDAQ:FTNT) trades at a ahead cost-earnings ratio of forty nine.51, a PEG ratio of two.96 and a cost-gross sales ratio of ten.64.

All round, Zscaler’s current gains appear to have pushed the company’s valuation multiples even higher. It stays to be noticed whether there is additional room for extended gains in the coming months. With demand from customers for net safety ramping up, even so,there could be an opportunity to capitalize, which could improve expansion.

Disclosure: No positions in the stocks stated.

Study additional here:

Not a High quality Member of GuruFocus? Indication up for a no cost seven-day trial here. 

About the creator:

Nicholas Kitonyi

Nicholas is the founder of CAGR Benefit. He is a money analyst with intensive practical experience in investment investigation and stock current market assessment. His assessment has been featured on several investigation internet sites.

Nicholas has good know-how of both of those U.S. and European marketplaces. His investment model is concentrated on undervalued performs and expansion stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE a hundred, among other liquid devices.

Take a look at Nicholas Kitonyi’s Internet site