This growth share has doubled in value and offers a dividend
Absolute software (TSX: ABST) (NASDAQ: ABST) has more than doubled in value over the past year. Although the stock has fallen more than 15% from its all-time highs, it remains an exciting choice given its dividend yield and prospects for growth in cybersecurity.
The ongoing sell off of tech stocks could create an opportunity for bargain hunters. Here is an overview of Absolute’s outlook and its current valuation.
The company continues to experience rapid growth in the face of the growing need for online protection solutions. By carving out a niche with cloud-based endpoint security solutions, Absolute Software could just as easily have positioned itself for tremendous long-term growth.
Over the past year, companies have deployed more cash to secure their employees’ devices, as the global workforce has simultaneously moved away. This turned out to be a boon for Absolute Software. Its recurring annual revenue growth rate has increased for three consecutive quarters.
Now that the economy is reopening and people are returning to the office, the demand for cybersecurity is likely to persist. Russia’s unprecedented digital attack on numerous businesses and agencies on American soil sends a clear message: We are in the midst of a cyber war. While the government must step in to provide protection, businesses must also make independent investments.
This means cybersecurity companies like Absolute can maintain momentum in a post-pandemic world. Accelerated growth of the education segment and a growing international presence are expected to help strengthen the company’s revenue base. After posting a 16% year-over-year increase in revenue in the fourth quarter, Absolute Software is expected to post decent revenue growth of 12% this year.
By trading with a price / sales ratio of 7.71, it is clear that Absolute Software is still trading at a reasonable valuation against its peers. The company doesn’t have a lot of debt on its balance sheet and has enough dry powder ($ 132 million in cash) to fuel acquisitions.
All things considered, Absolute Software’s stock is not cheap but is certainly not as over the top as the rest of the tech industry. The fact that the company has lost almost a third of its value this year makes it a growth stock at a reasonable price.
Absolute Software is an exciting choice for investors looking for cybersecurity opportunities. In addition to its core business and revenue growth, the company boasts of a forward annual dividend yield of 1.74%, providing a unique opportunity for investors to generate long-term passive income.
At the end of the line
As the global workforce was remote last year, Absolute Software saw sales increase. However, the demand for cybersecurity tools is expected to persist in a post-crisis world. Russia’s latest attack makes it clear that our digital footprint is not secure. Absolute is expected to experience steady growth for the foreseeable future. Meanwhile, the recent correction has made its stock much better valued.
For long-term investors, this is starting to appear as an attractive opportunity. Keep an eye on it.
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