How to Protect Your Business From Cyber Warfare

By WEALTH Magazine Staff | Print This Article

Cyber warfare is growing rapidly, and spending on network security is following pace. Worldwide spending on network and data-security technology will rise to more than $10 billion by 2016 from about $6 billion last year, according to a market-outlook report by technology-forecaster ABI Research.

Another recent study, by Forrester Research Inc. (Nasdaq: FORR), found that the share of business information-technology budgets devoted to security nearly doubled from 7 percent in 2007 to an estimated 14 percent last year.

The Business Roundtable—an association of leading U.S. companies with more than $6 trillion in collective annual revenue and employing more than 14 million workers—recently called for a collaborative effort by the departments of defense and homeland security, as well as the greater intelligence and diplomatic communities, to better protect businesses and national security.

And for good reason: Businesses worldwide lose a staggering $221 billion a year to data theft. Americans are affected to the tune of $54 billion. The need for cyber security will only grow as attacks continue to increase in frequency and sophistication. Cyber security stocks make good investment candidates for precisely that reason.

The editors at Money Morning suggest that investors consider the following five stocks as opportunities to cash in on the growing cyber security field:

1. Symantec Corp., the largest publicly traded computer-security firm, provides data protection to a wide range of clients all over the world. Symantec earned 92 cents a share in the fiscal year ended April 1, 2011, and currently carries a price/earnings (P/E) ratio of 21. Projected earnings for this year are $1.61 per share, and the average analyst price target is $22.00.

2. Check Point SoftwareTechnologies Ltd. Check Point specializes in developing custom software and hardware that allows companies to provide secure online financial transactions worldwide. The company topped off six years of earnings growth with a profit of $2.13 a share in 2010, and carries a P/E of 24.

3. Sourcefire Inc. Sourcefire provides IT security solutions for companies in health care, financial services, manufacturing, energy, education, retail and communications sectors worldwide. Revenue of $130.5 million in 2010 almost tripled 2007 numbers. Earnings per share rose to 53 cents from 32 cents in 2009, and analysts estimate earnings of 68 cents a share in 2011.

4. SAIC Inc. has a handle on government computer security, serving many federal government agencies and branches of the U.S. military, along with state, local and foreign governments. The company earned $1.51 a share on revenue of $11.1 billion in the fiscal year ended Jan. 31, 2011, giving it a P/E ratio of just 8.65. Analysts expect earnings to be flat to slightly higher over the next two years.

5. ManTech International Corp., a diversified provider of security technologies for government agencies, including the CIA, the FBI and the Department of Homeland Security. ManTech had $2.6 billion in revenue in 2010, dropping earnings of $3.43 a share to the bottom line. Earnings are expected to rise to $3.91 in the coming year. The stock has an average projected price target of $47.

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