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Worried About Cybersecurity? 2 Software Businesses to Put You Ahead of the Pack

Like many Fool readers, I’ve followed cryptocurrencies with intrigue. Full disclosure: I own no cryptocurrencies, but I know someone who knows someone who does. According to Wikipedia, there are 1,324 cryptocurrencies on the Internet; the growth of this alternative finance ecosystem is staggering. Bank of England Governor Mark Carney is unfazed, however. Carney  recently stated that he believes that cryptocurrencies do not pose a threat to conventional financial markets. Only time will tell.

Cryptocurrencies are threatening cybersecurity. Ever heard of cryptojacking? It’s when your computer browser gets hijacked and used without your knowledge for crypto-mining. Outsourcing the heavy power consumption that I mentioned previously is a devious trick. Such hacking schemes have already taken out several cryptocurrencies.

Just this past week, a South Korean company called Yapian declared bankruptcy after losing 17% of its cryptocurrency due to a second successful hack on its currency. Flipping this storyline around, it’s a reminder that companies with a track record of online business and software will experience a strong future. These two software companies fit this description. They do more than cybersecurity, which is an important piece of diversification in a sector that is notorious for fast changes.

Altus Group Limited (TSX:AIF) is a hot stock, a $1.4 billion company provider of independent advisory services, including software, in commercial real estate. There are no cryptocurrencies here, but software is its core. By the numbers, the company is solid. The price-to-earnings ratio (P/E) is quite low at 11.5, which is favourable metric for value investors. Yearly revenue is 33% of the company’s market cap: solid! Price-to-sales ratio (P/S) is a bit high at 2.59.

Tailwinds for Altus

Altus shares will be buoyed by its return-on-equity that is currently 33%. Altus is solid across three business divisions. The Analytics part of the business is now stronger with new clients, growing software license fees, and strategic acquisitions.

CGI Group Inc. (TSX:GIB.A)(NYSE:GIB) is a 40-year old company with a $20 billion market cap. The company claims to be the fifth-largest independent IT and consulting service business in the world. CGI shares are becoming more expensive to buy. Price-to-sales ratio (P/S) is creeping up and currently sits around 1.9. This could be a new norm, but it is more likely that a 2018 drop in price would make this important metric revert to the mean (at P/S of 1.5).

Looking at the chart, CGI has had a multi-year run. If you invested $1,000 in CGI in 2010,  it would now be worth $4,768, which amounts to an impressive growth rate of 25% per year. CGI shareholders benefitted from this growth despite fairly drastic pullbacks in  recent years: a 20% drop in 2015, a 15% drop in 2016, and a 10% drop between June and August of 2017. These represent good buying points if CGI is on your watch list.

Tailwinds for CGI

The year 2018 is forecasted to be recession-free business as usual globallyso CGI should experience another good year. Count on CGI to deliver because over 50% of revenue comes from government and financial services sectors and the geographically diverse business includes clients in the U.S., Canada, the Nordic countries, Europe, and Asia.

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Fool contributor Brad Macintosh has no position in any stocks mentioned. Altus Group Limited and CGI Group Inc. are recommendations of Stock Advisor Canada.

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