Palo Alto Networks PANW
What does Palo Alto Networks do?
Palo Alto Networks is a software provider specializing in cybersecurity, headquartered in the United States. The company offers a broad platform covering network security, cloud security and security operations. Core areas include firewalls in hardware and virtual form, the cloud-based access service Prisma Access, the management solution Strata Cloud Manager and the Prisma Cloud cloud protection platform. In addition there is the Cortex family, with solutions for detecting and defending against attacks, including XDR, XSOAR and the AI-based platform XSIAM.
The company generates revenue from product sales as well as from subscriptions, support services and security services. Customers are large enterprises, government agencies and service providers worldwide. In terms of competitive position, Palo Alto Networks pursues a platform strategy in which customers consolidate as many security functions as possible with one provider. Competitors include established network security vendors, specialized cloud and endpoint security firms, and large technology groups with their own security offerings.
Score profile
Rank vs. Software - Infrastructure (50 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Palo Alto Networks ranks below average in the group Software - Infrastructure (2.6/10). On growth, the company ranks above average in the group Software - Infrastructure (6.0/10). On valuation (higher = cheaper), the stock ranks in the bottom fifth in the group Software - Infrastructure (1.8/10). On financial strength, Palo Alto Networks ranks below average in the group Software - Infrastructure (3.0/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 66.8x | 16.0x | better than 5 % |
| PEG ratio | 1.6x | 1.4x | better than 41 % |
| Price/sales | 23.3x | 3.8x | better than 7 % |
| Price/book | 9.7x | 5.8x | better than 17 % |
| Revenue growth | 34.5% | 14.3% | better than 91 % |
| Earnings growth | 0.0% | 24.4% | better than 29 % |
| Gross margin | 70.4% | 72.3% | better than 43 % |
| Operating margin | 5.4% | 13.3% | better than 17 % |
| Net margin | 2.7% | 10.5% | better than 21 % |
| Return on equity | 1.7% | 12.4% | better than 21 % |
| Debt/equity | 9.3% | 17.5% | better than 59 % |
| Current ratio | 0.9x | 1.5x | better than 13 % |
| Free cash flow yield | 1.6% | 3.7% | better than 19 % |
| Dividend yield | 0.0% | 1.1% | – |
| Payout ratio | 0.0% | 31.4% | – |
| Beta | 0.97 | 1.04 | – |
Valuation: what is Palo Alto Networks worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Palo Alto Networks a model range of 208.00 USD to 320.82 USD per share.
50 analysts, average rating “Buy”, average price target 400.00 USD (+22.6%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Demand depends on the threat landscape and on companies' need to protect their IT environments against cyberattacks.
- Recurring revenue from subscriptions and services is gaining weight and supports the predictability of the business.
- Bundling multiple security functions on one platform enables additional sales to existing customers.
Risks
- Competition from security specialists and large technology groups can put pressure on prices and market share.
- Acquisitions carry integration risks and can weigh on product strategy and cost structure.
- Cautious IT budgets or longer decision cycles can delay orders, particularly for large projects.
What to look for with Palo Alto Networks
Contracted revenue not yet recognized is informative, as it reflects the predictability of the subscription business and customer retention.