Greater Demand for Cybersecurity, Including Identity & Access Management Software Solutions, Could be Boosting These Stocks

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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

As the world becomes increasingly digitized, cybersecurity threats simultaneously mount. The COVID-19 pandemic and a push towards remote work have intensified the threats of data leaks, breaches, ransomware attacks and other cybersecurity concerns.

It seems as if cybersecurity attacks are everywhere nowadays and no one is immune. Everyone — from private individuals to educational institutions and larger businesses and corporations — is at risk. According to Cybercrime Magazine, the global cost of cybercrime is expected to reach $10.5 trillion annually by 2025.

As more organizations search for effective ways to protect sensitive information, leaders are increasingly turning to cybersecurity companies. Cybersecurity companies offer services and solutions to combat threats and safeguard private data and networks. 

The increase in demand for cybersecurity companies has had an advantageous effect on cybersecurity stocks, particularly for those that offer Identity and Access Management solutions (IAM) and related software as a service offerings (SaaS).

According to a research report from Grand View Research, the global identity as a service (IDaaS) market was valued at $3.34 billion in 2019 and projected to grow at a compound annual growth rate of 22% to $16 billion by 2027. Growth is driven by increasing demand for cloud-based solutions for data security as organizations are increasingly required to provide remote access for employees working from home – beyond the corporate firewall. Strict regulatory mandates and laws pertaining to identity theft such as General Data Protection Regulation and Health Insurance Portability and Accountability Act (HIPAA) are also driving demand for identity solutions, according to Grand View. Organizations are taking necessary measures, which really requires end-to-end identity and access management functionality to ensure robust security. And many investors are finding enormous potential within this sub-sector of the cybersecurity market. 

Leading identity management (IDaaS) cybersecurity stocks and investments

Some of the biggest names in the identity and access management cybersecurity space that have attracted the attention of both investors and global clients alike include ForgeRock FORG, Okta OKTA, SailPoint Technologies SAIL, CyberArk CYBR, and Ping Identity Holding PING.

FORG recently announced its initial public offering (IPO), and its stock has subsequently gained traction as a result of the company’s accelerating sales growth. In mid-October 2021, FORG was trading at a 16 times enterprise value (EV)-to-revenue ratio.

EV/revenue is a common financial measure that compares the total value of a company to its sales. The higher the EV/revenue ratio, the greater indicator that a stock is increasingly popular among investors — and cybersecurity stocks are indeed capturing the attention of investors. 

One of the largest cybersecurity companies in the entire sector, OKTA, was recently trading at more than 35 times on an EV/revenue basis. Excluding OKTA, cybersecurity companies FORG, SAIL, CYBR and PING were trading at a median multiple of approximately 12 times Enterprise Value/revenue. 

Are IAM and IDaaS Cybersecurity Stocks Overvalued?

Although the stocks of many IAM cybersecurity companies trade at levels that are double-digit times revenue, the sector isn’t necessarily overvalued. In fact, the growth potential outlook for cybersecurity and identity management remains seemingly very strong.

According to the Bureau of Labor Statistics, the overall cybersecurity industry is expected to grow by 31% between 2019 and 2029. For comparison, the growth rate across all other industries is projected at 4%.

Nevertheless, it’s usually possible to find undervalued, potential hidden gems within any fast-growing sector. BIO-key International Inc. BKYI could be an example. It offers the top solutions of the best IAM cybersecurity firms — and was recently trading at only about 3 times EV/revenue.

BIO-key is a software company that offers identity and access management cybersecurity solutions for enterprises and consumers. It incorporates multi-factor authentication (MFA), single sign on (SSO), identity access management (IAM), and leading biometric authentication options (Identity-Bound Biometrics).

BIO-key’s innovations are backed by more than 25 years of research and expertise. Its systems are trusted by over a million users, including Fortune 500 companies across the financial services, healthcare, education, manufacturing, communication, transportation and government sectors.

BIO-key products are currently being used by the leading military cybersecurity team in the world, the largest telecommunications company and an International bank to automate the identification of more than 9 million clients and recently the company made headlines for its strategic partnerships with several educational institutions, including the University of Denver.

Investors can review BIO-key’s financial information, latest news and quarterly reports here.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.