Let’s cover CrowdStrike ($CRWD), which has been a well-upvoted topic on the ROIC research request board.
CrowdStrike is a provider of cloud-delivered cybersecurity technology and sells cutting edge software such as anti-virus, endpoint detection & response, threat intelligence, vulnerability assessment, malware analysis, and security. They seem to compete against other security companies like Trend Micro and Fortinet.
From first glance, they look too expensive at 40x forward consensus Gross Profit. But looking into their quarterly growth numbers, they are an absolute monster on pace to grow 85% in 2020. If I extrapolate this growth out, the company is trading for more like 31x 2021 and 19x 2022 Gross Profit.
This actually sits favorably between Snowflake ($SNOW) growing 120% but trading for over 140x forward Gross Profit and Fastly ($FSLY) trading at the same 40x forward Gross Profit multiple but only growing at 40%. Put another way, with $CRWD you probably get 4.0x the growth of Paypal ($PYPL) for 1.7x the price.
In this environment, I have a general rule of thumb not to own typical growth stocks over 25x forward Gross Profit, but $CRWD’s huge growth and attractive cloud business model may change my mind here, even if we’re late to the party. I will think about adding a position to the ROIC Big Board this week.