Gen Digital (NASDAQ:GEN) is probably not a name that most investors are familiar with, but they may know the company from its past iterations when it was called Symantec and later, NortonLifeLock.
Gen Digital, a cybersecurity software company, still owns Norton and Lifelock, but it changed its name to Gen Digital last year when it acquired Avast Software, a Prague-based cybersecurity firm that owns AVG and CCleaner, among other assets.
Gen Digital stock is up 4% year to date and is trading at roughly $22 per share. With its cheap valuation and strong earnings potential, it is well positioned to move higher in the years ahead.
A leader in consumer cybersecurity
The first full year of the combined company has been a successful one. In the second quarter of its fiscal 2024, which ended Sept. 29, Gen Digital generated $948 million in revenue, up 27% year over year, while its net income more than doubled to $149 million, or 23 cents per share.
Bookings, which are customer orders received that are expected to generate future revenue, were up 28% year over year to $923 million. Gen Digital also grew its customer base by more than 300,000 in the quarter to 38.5 million and boosted its average revenue per user year over year.
For its fiscal third quarter, Gen Digital anticipates revenue of between $950 million and $960 million, a sequential increase of 1%, and for all of fiscal 2024, the firm anticipates revenue in the range of $3.81 billion to $3.84 billion, up from $3.34 billion in FY 2023.
While it is considered a top-10 cybersecurity software company, Gen Digital focuses on the consumer or retail segment of the market as opposed to the enterprise segment. Additionally, the company is among the leaders in the consumer space. As we move deeper into the digital age with artificial intelligence and new technologies creating new threats and more reasons for security, Gen Digital’s services should be increasingly in demand.
“We created Gen just one year ago, knowing that NortonLifeLock and Avast together would be the company to deliver Cyber Safety to everyone,” CEO Vincent Pilette said. “Our digital lives keep expanding and unfortunately, cyber threats do too. With our integrated platform and technology, our global reach directly or through partners, and our commitment to serve and win, Gen is best positioned to lead this dynamic and expanding market.”
Lots of room to run
Along with its steady revenue growth, Gen Digital generates a significant amount of cash, with $981 million in operating cash flow over the trailing 12 months and $970 million in free cash flow. That’s afforded by its high margins, with a 39% operating margin over the trailing 12 months and a 38% profit margin. This means Gen Digital operates efficiently, profiting more than most off of its products and services.
With such revenue growth, margins and cash flow, it should be able to continually invest in new technologies, services and infrastructure to stay ahead of the competition.
Finally, the stock is very cheap right now with a price-to-earnings (P/E) ratio of just 9.7. The forward P/E is slightly higher at 11.1, but the P/E-to-growth (PEG) ratio, which looks out five years, is just 0.89, indicating an undervalued stock.
The median price target for this stock is $27 per share, which is roughly 21% higher than it is now. There is a lot to like about Gen Digital, so you might want to put this one on your list of stocks to watch.
Disclaimer: All investments involve risk. In no way should this article be taken as investment advice or constitute responsibility for investment gains or losses. The information in this report should not be relied upon for investment decisions. All investors must conduct their own due diligence and consult their own investment advisors in making trading decisions.
