On September 8, 2017, Equifax Inc. (NYSE:EFX) announced that it had been the victim of a massive cybercrime effort that could potentially impact the secure data of approximately 143 million U.S. consumers as well as millions in the U.K. and Canada. The attack, which began sometime in May, was not discovered until July 29. Shares of Equifax have since fallen over 30%, and the company is facing the possibility of a multitude of class-action lawsuits from customers who had their data compromised.
The Equifax data breach is yet another example of how crucial it is for companies to keep on top of cybersecurity systems. Cyberattacks on Canadian companies have risen markedly in 2017; attacks can come from independent criminal actors or can be complex actions from foreign governments.
This reality underlines how important it is for companies to invest in top-flight cybersecurity platforms to protect information from the most sophisticated forms of cybercrime. Demand for technology and expertise is, naturally, booming. We will look at two companies that are positioned well in this rising industry.
Avigilon Corp. (TSX:AVO) is a Vancouver-based company that provides security solutions, this includes software that protects critical infrastructure, retail environments, schools, and other locations. The company posted its second-quarter results on August 9. Revenue increased 16% to $99.4 million from the $85.7 million reported in Q2 2016, beating analyst expectations by 10%. It posted a gross profit of $51.1 million compared to $43 million in the previous year.
Operating expenses as a percentage of revenue fell from 51% to 42%, and the company posted record cash flow from operations of $20.2 million. The stock has increased 39.5% in 2017 as of close on September 14. It has seen growth of 97% year over year and 295% since its initial public offering in 2011. The kind of software Avigilon offers can help avoid future hacks, like the ones that afflicted Canadian government offices in March of this year.
Shares of BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) have fallen 28% from the 2017 high of $15.82 reached in June. Investors have seemingly lost some patience with the company, though the stock is still up 22% this year. The story behind BlackBerry is an intriguing one, as it has transitioned from a hardware manufacturer to software.
BlackBerry has worked to spread its cybersecurity platform not only to private entities, but also to governments in search of better technology. Though the Equifax breach demonstrates the risk faced by private companies, governments are being forced to dramatically improve cybersecurity. The U.S. military has ramped up spending in cybersecurity, and Germany has created an entirely new military unit dedicated to cyberwarfare.
BlackBerry has worked closely with the U.S. military as its AtHoc networked crisis communications software is in use protecting the mobile communications of hundreds of thousands of U.S. personnel in dozens of facilities around the globe. Even in light of recent pessimism, I love BlackBerry’s long-term outlook as the company establishes a strong footprint in security software.
This small-cap stock is “Hidden in Plain Sight!” It’s flying under the radar and is being touted as a “royalty collector” by several of our top Canadian analysts.
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Fool contributor Ambrose O'Callaghan has no position in any stocks mentioned. Avigilon is a recommendation of Stock Advisor Canada.