We noticed a bullish Proofpoint Inc. (PFPT) thesis on ValueInvestorsClub by rosco37. VIC is one of our favorite sites to follow because the ideas are usually posted by aspiring analysts who tend to go the extra mile to write their research. We find the ideas presented on the site well thought out and definitely worth checking. Click here for the full article. Below we summarized the PFPT bullish thesis:
PFPT is a software as a service (SaaS) cybersecurity company providing cloud-based solutions for inbound email security, outbound data loss prevention, email encryption and archiving, social media security, digital risk, mobile devices and electronic discovery.
A cash cow with a business predicted to clock 20% per annum growth, and a low-to-mid-20s FCF, the company has successfully been introducing new complementary products and expanding client base and their wallet share. PFPT’s clientele primarily include large and mid-size companies, it focuses on products designed to protect users rather than infrastructure.
The company’s main competition are other cybersecurity firms and technology giants such as Google and Microsoft. The secret behind PFPT’s success in taking market share from other players like McAfee and Symantec lies in its low cost R&D, well-executed sales and marketing strategy. Its current renewal rate of 90% speaks volumes of a loyal customer base that is expanding PFPT’s overall TAM, which is higher than other traditional email security firms. As a large email security player, PFPT enjoys the scalability and hence is able to actively make M&As every year to expand and improve its overall product and services platter. The high gross profit margin on the back of a low cost structure further adds to the bottom line.
There has been no dividend pay-out but PFPT has announced in August 2020 a $300 million buy-back plan to take advantage of currently depressed stock price.
The pandemic did have some temporary adverse impact on some of PFPT’s businesses like retail, energy and travel but it has also aided the company serve more WFH employees with suitable new product line.
The scrip currently trading at a discount to the peer group, and its own intrinsic value. Considering its sustainable growth potential and strong earnings capability, PFPT warrants a serious consideration for a long position here.