The Best and Worst Performing Security Stocks of 2019

The United States economy welcomed 2020 on sturdy ground as the concluding weeks of 2019 were met by continued economic expansion, low unemployment and strong online shopping activity over the November-December holiday season.

The U.S. unemployment rate remained at a 50-year low of 3.5% in December 2019 — its lowest level since 1969, while third-quarter GDP grew modestly by an annualized rate of 2.1% compared with 2% in the second quarter. The two-year trade battle between the United States and China continued, with President Trump announcing at press time his intentions to sign a “phase-one” trade deal by mid-January.

The deal is projected to boost Chinese purchases of U.S. goods and services by roughly $200 billion over the next two years, with approximately one-fifth in spending to come from technology services and intellectual property usage.

Despite lingering trade uncertainty and geo-political conflicts, the global stock markets registered gains of more than 20% with one of the best performances in several years:

▶ The broad-based S&P 500 index closed the year 28.9% higher compared with the previous year decline of 8.4%.

▶ The Dow Jones Industrial Average finished 22.3% higher compared with the previous year decline of 7.9%.

▶ The Nasdaq sustained its best yearly performance in six years, increasing 35.2% compared with the previous year decline of 5.6%.

Further evidence of investor confidence, EBITDA (earnings before interest, taxes, depreciation and amortization) multiples for all three indices increased meaningfully for the 12-month period:

▶ S&P 500 increased from 11x to 14.1x EBITDA

▶ Dow Jones rose from 11.1x EBITDA to 13.9x EBITDA

▶ Nasdaq climbed from 13.5x to 18.3x EBITDA

The security market continues to mirror the strength of the broader economy. During the past decade, the physical security sector recorded a compound annual growth rate (CAGR) of 7% across three primary market segments: video surveillance, access control and intruder alarms & perimeter protection.

Market research firm Memoori predicts that the physical security market will reach a market value of approximately $57 billion by 2024 driven by the positive momentum behind new tech-enabled products and demand for IP-based security solutions.

The convergence of physical security infrastructure and IP networks creates greater vulnerabilities for potential cyberattacks on commercial and government entities. Per Gartner research, the number of Internet of Things (IoT) devices is projected to grow by more than 200% to 21.5 billion by 2025, continuing the digitization of our world and fueling the expected growth of the cybersecurity market to more than $170.4 billion by 2022.

With cyberattacks continuing to grow in number, organizations are budgeting increased amounts of capital and human resources to cybersecurity. In December, the White House announced the new Federal Cybersecurity Research and Development Strategic Plan strategy which lays out actions for deterring cyber-attacks.

The Canadian Federal Government announced for the second year since 2018 that it is allocating additional dollars to support an unprecedented level of funding in support of its own National Cyber Security Strategy. A representative index of 42 physical security stocks compiled by Capstone Headwaters experienced an average growth of 18.8% in 2019. An index of 57 cybersecurity stocks increased 27.4% in the same period.

Following is a sampling of some of the strongest and weakest performing stocks in the physical and cybersecurity arenas in 2019.

STOCK PERFORMANCES

Physical Security, Strong Performers

Napco Security Technologies (Nasdaq: NSSC)

• 86.6% stock price increase
• Revenue grew by 12.7% from $93.9 million to $105.8 million over the last 12-month (LTM) period ending September
• Enterprise value/EBITDA multiple increased from 27.1x to 32.2x from the beginning of the year to the end of the year

Anixter (NYSE: AXE)

• 69.6% stock price increase
• Revenue grew by 5% $8.29 billion to $8.71 billion over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 7.6x to 10.2x for the 12 months ending Dec. 31

Halma (LSE: HLMA)

• 61.2% stock price increase
• Revenue grew by 10.7% from $1.15 bil-lion to $1.28 billion over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 20.6x to 28.1x for the 12 months ending Dec. 31

Allegion (NYSE: ALLE)

• 56.2% stock price increase
• Revenue grew by 7.2% from $2.65 billion
• to $2.84 billion over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 14.5x to 20.4x from the beginning of the year to the end of the year

United Technologies (NYSE: UTC)

• 40.6% stock price increase
• Revenue grew by 17.8% from $64.14 billion to $75.54 billion over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 11.2x to 11.9x from the beginning of the year to the end of the year

The Brink’s Co. (NYSE: BCO)

• 40.3% stock price increase
• Revenue grew by 4.9% from $3.48 billion to $3.66 billion over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 11.2x to 15.4x from the beginning of the year to the end of the year

Stanley Black & Decker (NYSE: SWK)

• 38.4% stock price increase
• Revenue grew by 4% from $13.81 billion to $14.36 billion over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 10.7x to 14.2x from the beginning of the year to the end of the year

ASSA ABLOY (OM: ASSA B)

• 31.7% stock price increase
• Revenue grew by 13.9% from $8.51 billion to $9.7 billion over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 14.2x to 16.8x from the beginning of the year to the end of the year

Cybersecurity, Strong Performers

Leidos Holdings (NYSE: LDOS)

• 85.7% stock price increase
• Revenue grew by 7.2% from $10.06 billion to $10.78 billion over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 10.1x to 15.5x from the beginning of the year to the end of the year

CACI Int’l (NYSE: CACI)

• 73.6% stock price increase
• Revenue grew by 14% from $4.55 billion to $5.18 billion over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 10.4x to 16.8x from the beginning of the year to the end of the year

Ultra Electronics Holdings (LSE: ULE)

• 69% stock price increase
• Revenue grew by 5.8% from $987 million to $1.04 billion over the LTM period ending June
• Enterprise value/EBITDA multiple increased from 8.6x to 13.9x from the beginning of the year to the end of the year

Avast (LSE: AVST)

• 65.7% stock price increase
• Revenue grew by 13.1% from $747.5 million to $845.1 million over the LTM period ending June
• Enterprise value/EBITDA multiple increased from 14.9x to 18.7x from the beginning of the year to the end of the year

Booz Allen Hamilton (NYSE: BAH)

• 57.8% stock price increase
• Revenue grew by 11.4% from $6.36 billion to $7.09 billion over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 12.4x to 16.3x from the beginning of the year to the end of the year

ManTech Int’l Corp. (Nasdaq: MANT)

• 52.7% stock price increase
• Revenue grew by 10% from $1.92 billion to $2.12 billion over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 12.8x to 18.2x from the beginning of the year to the end of the year

CyberArk Software (Nasdaq: CYBR)

• 57.2% stock price increase
• Revenue grew by 31.4% from $314.5 million to 413.3 million over the LTM period ending September
• Enterprise value/EBITDA multiple decreased from 55.1x to 50.3x from the beginning of the year to the end of the year

Sophos Group (LSE: SOPH)

• 53.2% stock price increase
• Revenue grew by 5.1% from $691.7 million to $726.9 million over the LTM period ending September
• Enterprise value/EBITDA multiple decreased from 63.9x to 41.8x from the beginning of the year to the end of the year

Physical Security, Weaker Performers

Bosch (BSE: 500530)

• 23.2% stock price decline
• Revenue declined by 20% from $893.5 million to $713.4 million when comparing the 6-month year-to-date figures for September 2018 and 2019, respectively. Annual revenue grew roughly 5% for Bosch’s fiscal year ending March 2019.
• Enterprise value/EBITDA multiple declined from 26.8x to 23.9x for the 12 months ending December

Synectics (AIM: SNX)

• 20.7% stock price decrease
• Revenue declined by 1.5% from $92.5 billion to $91.1 billion over the LTM period ending May 2019
• Enterprise value/EBITDA multiple remained flat at 6.6x for the 12 months ending December

Alarm.com Holdings (Nasdaq: ALRM)

• 17.6% stock price decrease
• Revenue grew by 19% from $397.9 million to $473.3 million over the LTM period ending September
• Enterprise value/EBITDA multiple decreased from 32.1x to 26.6x over the 12 months ending December

Magal Security Systems (Nasdaq: MAGS)

• 17.6% stock price decrease
• Revenue declined less than ½% from $89.5 million to $89.2 million over the LTM period ending September
• Enterprise value/EBITDA multiple decreased from 32.1x to 26.6x over the 12 months ending December

TagMaster AB (OM: TAGM B)

• 32.7% stock price decline
• Revenue grew by 6.7% from $21.9 million to $23.5 million over the LTM period ending September
• EBITDA declined 73.5% from $2.7 million to $730,000 over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 8.4x to 44.7x from the beginning of the year to the end of the year, as the denominator (EBITDA) decreased.

Cybersecurity, Weaker Performers

Commvault Systems (Nasdaq: CVLT)

• 24.5% stock price decrease
• Revenue declined by 2.1% from $710.5 million to $695.5 million over the LTM period ending September
• Enterprise value/EBITDA multiple decreased from 84.4.1x to 31.7x over the 12 months ending December

F5 Networks (Nasdaq: FFIV)

• 13.8% stock price decrease
• Revenue grew by 3.7% from $2.1 billion to $2.2 billion over the LTM period ending September
• Enterprise value/EBITDA multiple decreased from 13.3x to 12.7x over the 12 months ending December

Juniper Networks (NYSE: JNPR)

• 8.5% stock price decrease
• Revenue declined by 6.1% from $4.7 billion to $4.4 billion over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 9.6x to 11.1x over the 12 months ending December

Digital Arts (TSE: 2326)

• 7.7% stock price decrease
• Revenue grew by 8.3% from $48.9 million to $53 million over the LTM period ending September
• Enterprise value/EBITDA multiple decreased from 30.1x to 20.8x over the 12 months ending December

Trend Micro (TSE: 4704)

• 5.3% stock price decrease
• Revenue grew by 3.1% from $1.4 billion to $1.5 billion over the LTM period ending September
• Enterprise value/EBITDA multiple decreased from 13x to 11.3x over the 12 months ending December

FFRI (TSE: 3692)

• Stock price increase of less than .5%
• Revenue declined by 4.6% from $15.2 million to $14.5 million over the LTM period ending September
• Enterprise value/EBITDA multiple increased from 58.3x to 64x over the 12 months ending December

CrowdStrike Holdings (Nasdaq: CRWD)

• CRWD completed its IPO at a $58 stock price, reaching a high of just under $100 per share before finishing the year at roughly $50 for a net 27% stock price decrease over the ~6-month timeframe.
• Revenue grew 37.2% from April to October 2019, while net losses grew 9.5% from $128.8 million to $141 million over the same six-month period

Keep reading for a 2019 M&A overview…

If you enjoyed this article and want to receive more valuable industry content like this, click here to sign up for our FREE digital newsletters!

Related Content

Global Security Operations Centers: Trends and Opportunities in 2024 and Beyond

Security Customers Push Integrators to Be Long-Term Partners, Not Just Salespeople

Genetec Underlines Dealer Centricity, Hybrid Approaches at Global Press Summit ’24

Security Industry Forecast: Experts Chime in, Sharing Expectations for 2024 and Beyond