The recent pandemic has accelerated the shift to digital commerce for a large portion of businesses globally. In such a scenario, the demand for cybersecurity and data protection becomes of paramount importance. This key factor is accelerating financial growth for companies in the cybersecurity domain. For example, the American software firm Palantir Technologies has recently seen strong business growth. In the June quarter, its revenue rose sharply, as the company added 20 net new customers during the quarter.
While PLTR’s business and financial growth might look impressive to many, the competition in the cybersecurity domain is increasing at a fast pace. In this article, I’ll highlight one Canadian tech company that could grow at a much faster pace than Palantir. That’s why I expect its stock to yield much stronger returns than its competitors in the long term, including Palantir. Let’s take a closer look.
Magnet Forensics (TSX:MAGT) has been on my radar since the company got listed on the TSX earlier this year. It’s a Waterloo-based enterprise software firm with a market cap of about $394 million. The company mainly focuses on providing advanced investigative tools to public and private organizations globally.
These tools help organizations investigate and analyze data from various digital sources, including PCs, cell phones, and the cloud. Upon finding any vulnerability, Magnet’s software solutions are capable of collecting the details and managing evidence.
Strong financial growth trends
In the June quarter, Magnet Forensics’s revenue rose by 42% year over year to US$16.5 million. While the company continued to add new customers, its revenue from existing accounts also rose. As a result of this strong business growth, it reported adjusted net earnings of US$0.04 per share — nearly 128% higher compared to Street analysts’ consensus estimates.
Despite its aggressive business expansion goals, Magnet Forensics continues to maintain strong margins due to its cost-effective products and services delivery approach. In the second quarter, its gross margin stood at 94% compared to 95% a year ago.
Stronger growth prospects
In a very short period of time since its inception, Magnet’s customer base has grown to more than 4,000 in over 90 countries. Its management is continuing to focus on growing the company’s install base further by upselling and cross‐selling products and services. As a result of these efforts, its software maintenance and support revenue are also rising.
It’s important to note that nearly all of its products are subscription-based. That’s why the company’s recurring revenue base is growing at a fast pace. In the latest quarter, roughly about 81% of its total revenue was made up of recurring revenue. Overall, as the demand for cybersecurity and data protection software solutions rises further in the coming years, I expect Magnet Forensics’s financials growth trends to improve further.
One more reason to buy MAGT stock now
In April, Magnet Forensics stock started trading on the TSX. Within four months of its listing on the exchange, it surged by about 190% to above $65 per share. However, MAGT stock has lost nearly 35% of its value since August end and currently trades at around $42.15 per share — without any negative change in its fundamentals or its future growth outlook. That’s why I consider this recent decline an opportunity to buy this amazing Canadian growth stock cheap.