ZScaler Q4 FY7/24 Earnings Review

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Back Into The Accumulation Zone - Again!

by Alex King, CEO, Cestrian Capital Research, Inc.

ZScaler printed perfectly good numbers yesterday after the close, but since the market is once again self-harming using the Vix as its weapon of choice, the stock decided to take one almighty dunk. Down about 18% by the close today, which means we move back to Accumulate rating from our prior Hold rating.

$ZS remains our #1 pick in cybersecurity.

Here's the headline numbers.

So, read on!

Financial Fundamentals

The company continues to see modestly decelerating revenue growth and, indeed, order book growth. Cashflow margins are flat at around 16%, with revenue growth in the 34% range (both on a TTM basis). The company has some $1.3bn of net cash on hand and generates positive unlevered pretax free cashflow every quarter. The order book ("remaining performance obligation") now stands at >2x TTM revenue, and it continues to grow at +26% vs. prior year.

Fundamental Valuation Multiples

At 66x trailing TTM unlevered pretax FCF I really don't think this thing is all that expensive. Nvidia is cheaper - but then Nvidia is cheaper than most things as a function of cashflow growth (even though everyone thinks NVDA is in a giga bubble!).

Technical Analysis

Here’s our longer-term chart on ZS. You can open a full page version, here.

Rating

We rate $ZS at Accumulate between $74-167/share.

Cestrian Capital Research, Inc - 4 September 2024.

DISCLOSURE - Cestrian Capital Research, Inc staff personal accounts hold long positions in $ZS.