Imperva Stock: Growing Trend Should Terrify Internet Users Everywhere
Imperva Looks Intriguing with Strong Upside at Current Price
We all know about the constant threats to critical data in this country, so it wasn’t that much of a surprise when news surfaced about the massive data breach at Equifax Inc. (NYSE:EFX), which saw half of the personal credit information in the United States hacked.
The ongoing failure of companies to safeguard their critical data continues to be a real concern, which will bode well for cybersecurity stocks such as small-cap Imperva Inc (NASDAQ:IMPV).
Imperva is a rapidly growing developer of cloud and physical cybersecurity solutions used to defend critical data and applications on a company’s network.
The cybersecurity sector was sizzling along in November 2015 when IMPV stock was trading at $78.00, up 325% from $18.40 in May 2014.
Imperva is trading at just below the midpoint of its 52-week range, underperforming the S&P 500 with a 16.8% decline over the past 52 weeks. The positive is that IMPV stock is displaying some strength, with a run-up of 16% this year.
And there is more to come.
The beta of 2.00 implies that Imperva stock’s risk to the market is higher. In a rising market, IMPV stock will likely outperform, while it will likely lag behind in a down market.
My Bull Thesis for IMPV Stock
Imperva has managed to drive revenues higher in three consecutive years, starting from $137.76 million in 2013 to $264.55 million in 2016, representing a strong compound annual growth rate (CAGR) of 24.50%.
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The growth rate is predicted to come in at around 21.50% to $321.38 million this year, followed by growth of 18.20% to $379.86 million in 2018. (Source: “Imperva, Inc. (NASDAQ:IMPV),” Yahoo! Finance, last accessed October 10, 2017.)
Imperva has also managed to control the cost side by driving up gross profits and maintaining gross margins at 77% to 79% over the past three years.
|Imperva Gross Margins|
The expansion in revenues and gross profits while maintaining a high gross margin means Imperva is on the verge of making money after three straight years of losses.
After a loss of $0.07 per diluted share in 2016, Imperva is expected to earn an impressive $0.81 per diluted share this year and $0.94 per diluted share in 2018. The company could make as much as $1.08 per diluted share in 2018.
The earnings picture is quite bullish. The rise in the earnings per share (EPS) estimates over the past 60 and 90 days indicates a company that is accelerating its earnings growth.
Furthermore, Imperva has beaten the consensus EPS in four straight quarters. What was impressive was the average beats of 150%, 967%, 325%, and 380% to the next quarter.
The chart of Imperva stock dating back to 2012 displays several breakouts and subsequent failures to hold. This includes two rallies from $30.00 in November 2012 to $60.00 in February 2014, followed by a move from $20.00 in May 2014 to $77.00 in November 2015.
Chart courtesy of StockCharts.com
The inability to hold has been a disappointment, but there are some positive signs emerging on the daily chart.
Over the last three months, IMPV stock appears to be breaking higher from the base at $42.00 to $43.00 that began in August.
Chart courtesy of StockCharts.com
An uptick in the relative strength indicator (RSI) and a bullish moving average convergence/divergence (MACD) crossover could drive Imperva stock toward the recent $52.00 double top in June and July. A breakout here could see IMPV stock take a run at $55.00 and the 52-week high, representing a 30% move.
Of course, if Imperva can deliver the strong growth metrics, I wouldn’t be surprised to see an eventual move above $60.00 and toward its previous high.