4 Security Stocks to Watch on Prospering Industry Trends

Industry Overview - The Zacks Security industry is experiencing strong demand for cybersecurity products due to the increasing need for secure networks and cloud-based applications, particularly in hybrid work environments [1] - The surge in demand is driven by a significant rise in data breaches, leading companies to seek comprehensive IT security solutions [1] - The industry encompasses both on-premise and cloud-based security solutions, including identity access management, infrastructure protection, integrated risk management, malware analysis, and Internet traffic management [3] Major Trends - Rising cyber threats are escalating the need for robust security solutions, impacting not only individual companies but also national security [4] - The shift towards digital transformation and cloud migration is driving demand for cybersecurity solutions across various sectors, including education, healthcare, and entertainment [5] - Uncertain macroeconomic conditions and geopolitical issues may lead enterprises to delay significant IT investments, potentially affecting the security market in the short term [6] Company Performance - Companies like Palo Alto Networks, Fortinet, Okta, and CyberArk are benefiting from the trends in the cybersecurity market [2] - Fortinet is experiencing strong demand from large enterprise customers, with a focus on enhancing its Unified Threat Management portfolio [17] - Okta's identity security solutions are gaining traction as organizations adopt digital transformation strategies, serving 19,650 customers by the end of fiscal Q4 2025 [22] - Palo Alto Networks is benefiting from continuous deal wins and the adoption of next-gen security platforms, with a focus on AI and cloud security [25][26] - CyberArk Software is seeing increased demand for privileged access security solutions, supported by a strong presence in various verticals [29] Financial Outlook - The Zacks Security industry carries a Zacks Industry Rank of 82, placing it among the top 33% of over 250 Zacks industries, indicating solid near-term prospects [8] - The industry's bottom-line estimate for 2025 has increased to $1.43 from $1.29 expected a year ago, reflecting positive earnings outlook [10] - The industry has outperformed the broader Zacks Computer and Technology sector and the S&P 500, with a 23.1% increase over the past year compared to 8.2% and 10.2% for the sector and S&P 500, respectively [11] Valuation Metrics - The industry is currently trading at a forward 12-month price-to-sales ratio of 13.19, significantly higher than the S&P 500's 4.91 and the sector's 5.81 [13] - Over the last five years, the industry's price-to-sales ratio has ranged from a high of 19.36X to a low of 6.92X, with a median of 12.21X [14] Key Companies to Watch - Fortinet: Currently holds a Zacks Rank 2 (Buy), benefiting from strong demand and a projected market size for SD-WAN solutions reaching $80.91 billion by 2034 [18] - Okta: Also holds a Zacks Rank 2, with an upward revision of its fiscal 2026 earnings to $3.14 per share [23] - Palo Alto Networks: Holds a Zacks Rank 3 (Hold), with an upward revision of its fiscal 2025 earnings to $3.22 per share [28] - CyberArk Software: Holds a Zacks Rank 3, with an upward revision of its 2025 earnings to $3.65 per share [31]