Cybersecurity investment is a tricky thing. As quickly as technology develops in today’s world, cybersecurity moves faster, as it is a literal arms race to see who can hit who first. So why invest in cybersecurity stocks?
While the risk is high, potential rewards can quickly eclipse them, as it just takes the firm you invest in to protect against the next big data breach for their stock to skyrocket. How do you choose the right stocks? Read on for five of the top tips on how to choose a cybersecurity stock to invest in.
1. What Is Their Gross Profit Margin?
When it comes to gross profit margin, the bigger it is, the better, as the company has more money to invest in itself. Thus it has more money to throw into research and development. Software companies generally do well in this way, as they don’t need to manufacture a discrete unit for each sale.
Looking at the gross profit margin is one way investment firms, such as Option3ventures.com, use to figure out if a stock is a good fit for a portfolio. If it is fairly big, then it’s a safe stock to pick. Before if the margin drops, however.
2. Do They Generate Subscription Revenue?
Subscription revenue is the revenue that comes with selling your software as a service. This revenue covers things like subscriptions and is far more valuable than revenue from customer support and other professional services which are often only one-time payments. Subscription revenue is far less labor-intensive once the chain is set up, making a company’s revenue more stable.
3. How Big Is Their Customer Base?
Software as a service is only as good as the number of customers that use said service. A company’s customer base is critical to analyzing its future growth. Both customer acquisition and retention numbers are something to really look at.
4. What Are Their Operating Costs?
Operating costs can be tricky to distinguish from production costs when talking about a cybersecurity firm. Often, most of the operating costs are sunk into research and development, to keep up with the changing landscape of cybersecurity. Other things such as sales and marketing are higher when a company spends a lot of time on getting new customers.
5. How Do They Protect Your Data?
People are always looking for ways to protect their devices, whether they are traditional desktops or the latest tablet or phone, and the companies that can take advantage of that market are the ones that have the most potential going forward. The ways they protect your devices range from software firewalls to Virtual Private Networks, which are becoming very popular in today’s market. Some companies are even moving to AI-based solutions to protect their customers.
Cybersecurity investment is not something to go into lightly. Do your research on the top companies, invest in EFTs to diversify, and keep an eye on cybersecurity trends and how companies react to them. Keeping this in mind will create a successful portfolio for your future.
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