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3 Cybersecurity Stock Picks to Beat the Market in 2016

2016 seems to likely to offer a slow-growth environment for world economies and many equities, but even in a slow-growth world there are particular industries and sectors experiencing rates of growth that investors can tap into. As of late, cybersecurity stocks have been some of the better risk-reward stocks and have been generating large capital gains in an otherwise lack luster market.

The cybersecurity sector has been a hot one recently, especially as large companies like Apple AAPL and Target TGT , along with government agencies, have fallen victim to high profile attacks by hackers.

Also, cybersecurity stocks could be better off than many other stocks in a likely volatile market next year, as these companies are generating material growth in their financial results. One thing to keep in mind though is that reasonable valuations for this industry isn't exactly something that applies to many in the sector, as many cybersecurity firms are reinvesting heavily back into their businesses.

As we roll into 2016, here are 3 buy-ranked cybersecurity stocks to consider in a world where cyber-attacks are ever more present and protecting against future ones is more important than ever:

Check Point Software Technologies LTD (CHKP)

Check Point Software Technologies LTD CHKP is a leading provider of policy-based enterprise security and traffic management solutions. The stock is currently holds a Zacks Rank #2 (Buy), and could be a solid pick in the cybersecurity pick for 2016.

With its industry leading products like the world's leading enterprise security suite, FireWall 1r, and its patented Stateful Inspection Technology, CHKP delivers Secure Enterprise Connectivity solutions that protect information assets and enhance the performance of enterprise networks.

Analysts have become more bullish on the company's stock for 2016, as there have been 5 upward estimate revisions for 2016 in the last 60 days. CHKP is projected for EPS growth of 8.53% next year, and the company is looking to continue its streak of earnings beats into 2016, as it has been able to do so in each of the last 4 quarters by an average of over 3%.

Qualys Inc. (QLYS)

Based in Redwood, California, Qualys Inc. QLYS is a provider of cloud security and compliance solutions that enable organizations to identify security risks to their information technology infrastructures in order to help protect their IT systems and applications from cyber-attacks. The company offers products for vulnerability management, policy compliance, web application scanning, malware detection, and associated security products.

Qualys is currently a Zacks Rank #1 (Strong Buy), and analysts have become more bullish on this stock for 2016 as well. There have been 4 upward estimate revisions for 2016 in just the last 60 days, which has helped to push the Zacks Consensus Estimate up to $0.43 from $0.33 just 60 days ago.

The cybersecurity firm is projected for substantial EPS growth in 2016 of 18.58%, and it hopes to keep its earnings beating streak going into the New Year. Qualys has been able to beat on earnings estimates in each of the last 4 quarters by a impressive average of 155.83%

Vasco Data Security International Inc. (VDSI)

Finally there is Vasco Data Security International Inc. VDSI , which designs, develops, markets and supports security products and services which manage and secure access to computer systems of corporate and government customers. Based in Oakbrook Terrace, Illinois, VDSI also enables secure financial transactions to be made over private enterprise and public networks.

A current Zacks Rank #1 (Strong Buy) stock, VDSI has several pieces of data that make it a very solid option for 2016 in the cybersecurity sector. The Zacks EPS Consensus Estimate for next year has shot up to $1.04 from $0.82 just 60 days ago, suggesting strong analyst estimate revisions as of late for this stock.

VDSI also holds a B for both its Growth and Value Style Scores from Zacks. This can be attributed to the company's current cash flow growth being approximately 117%, as well as its 20% Net Margin and 25.46% Return on Equity figures.

In terms of a value stock, VDSI has a Price to equity ratio f 13.17, which is below the industry average, and an impressive figure in for a company in an industry where valuations tend to be high. The company also has a solid earnings yield figure, which is also above the industry average, at 7.59%.

Bottom Line

As more high profile cyber-attacks occur, both companies and governments will continue to put cybersecurity at the top of their lists of importance, increasing their spending in that area. This will benefit cybersecurity stocks greatly in moving forward as our world continues to become more and more dependent on the cyber networks.

2016 could be a successful year for the cybersecurity sector as a whole, and investors can secure their portfolios with the top ranked stocks that have been selected above in order to profit in the New Year from this growing trend.

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CHECK PT SOFTW (CHKP): Free Stock Analysis Report

APPLE INC (AAPL): Free Stock Analysis Report

TARGET CORP (TGT): Free Stock Analysis Report

VASCO DATA SEC (VDSI): Free Stock Analysis Report

QUALYS INC (QLYS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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