Loved by Press, Hated by Investors (SCUR)
I've been looking at Secure Computing (SCUR) lately, and I must say ... I'm a little confused.
Secure is the largest stand-alone computer security company around (or at least, the largest "pure play" on computer security). They were the inventors of the firewall, which was developed for government systems, back when the company was a piece of Honeywell, and their firewall has never been breached ... so they get a lot of government business, and a lot of attention from IT managers looking to buy stronger security products to protect networks.
They also have related solutions for computer security headaches -- including some very strong email spam (with their IronMail product) and malware prevention systems that, from what I can tell, work very well.
And that's why, in an era of steadily increasing focus on computer security and recognition that this is likely to be a key spending point for IT departments, Secure Computing has gotten a lot of attention from the business press ...
The Motley Fool is head over heels for SCUR.
Barron's ran a very favorable piece a few weeks ago.
Talking heads on CNBC have talked it up on several occasions over the last month or two.
And Goldman Sachs even upgraded the shares last week (though to be fair, there have been more downgrades than upgrades of late -- and this upgrade was just moving last month's sell up to a neutral).
And still ... the stock doesn't really move. I'd generally expect a small cap like this that gets some sustained press attention in a compressed time period to react favorably, but there seems to be a bit of a hangover from when SCUR shares spiked up to near $10 or so in February.
Admittedly, SCUR is well above where it traded most of last fall, but over the past two months as fan after fan has professed his love publicly ... nothing. The shares are right around $8, the same as they were in the beginning of March before this lovefest really took hold.
So ... who's right, is it the investors or the investment press? Generally, you'd have to think the market is right -- at least, if you believe in Efficient Market Theory. The market must know something that the journalists don't, or perhaps the journalists are being disingenuous or are being led astray by the investors they interview.
But in this case, I'm inclined to say that I think the market might be wrong. In the long term, at least.
If you agree that the general trend is for increased security needs, and you accept that SCUR billings might not move in a straight line even as they show strong overall growth, and you note that the company is entering what is expected to be a profitable year (forward PE of 18 or so) after digesting a big acquisition, I think the timing might be right for me to pick up some SCUR shares.
And as a fallback, note that this company is the small fish in the overall industry and would be a hugely strategic takeover candidate for many larger firms that don't have effective security offerings ... so there's always that takeover potential as well. And I suppose one can't rule out private equity, either, though SCUR does carry a bit of debt (about 15% of market cap, last time I checked) so they're not perhaps the ideal private takeout target.
The company announced that "billings" were a little shy of the forecast when they released earnings last week -- and the earnings were a little disapointing, which was good for shaving about 50 cents off the shares. But it sounds to me like this is potentially an opportunity to buy a long term growth trend at a little bit of a better price. I'll be keeping an eye on these shares for a possibly buy.
Secure is the largest stand-alone computer security company around (or at least, the largest "pure play" on computer security). They were the inventors of the firewall, which was developed for government systems, back when the company was a piece of Honeywell, and their firewall has never been breached ... so they get a lot of government business, and a lot of attention from IT managers looking to buy stronger security products to protect networks.
They also have related solutions for computer security headaches -- including some very strong email spam (with their IronMail product) and malware prevention systems that, from what I can tell, work very well.
And that's why, in an era of steadily increasing focus on computer security and recognition that this is likely to be a key spending point for IT departments, Secure Computing has gotten a lot of attention from the business press ...
The Motley Fool is head over heels for SCUR.
Barron's ran a very favorable piece a few weeks ago.
Talking heads on CNBC have talked it up on several occasions over the last month or two.
And Goldman Sachs even upgraded the shares last week (though to be fair, there have been more downgrades than upgrades of late -- and this upgrade was just moving last month's sell up to a neutral).
And still ... the stock doesn't really move. I'd generally expect a small cap like this that gets some sustained press attention in a compressed time period to react favorably, but there seems to be a bit of a hangover from when SCUR shares spiked up to near $10 or so in February.
Admittedly, SCUR is well above where it traded most of last fall, but over the past two months as fan after fan has professed his love publicly ... nothing. The shares are right around $8, the same as they were in the beginning of March before this lovefest really took hold.
So ... who's right, is it the investors or the investment press? Generally, you'd have to think the market is right -- at least, if you believe in Efficient Market Theory. The market must know something that the journalists don't, or perhaps the journalists are being disingenuous or are being led astray by the investors they interview.
But in this case, I'm inclined to say that I think the market might be wrong. In the long term, at least.
If you agree that the general trend is for increased security needs, and you accept that SCUR billings might not move in a straight line even as they show strong overall growth, and you note that the company is entering what is expected to be a profitable year (forward PE of 18 or so) after digesting a big acquisition, I think the timing might be right for me to pick up some SCUR shares.
And as a fallback, note that this company is the small fish in the overall industry and would be a hugely strategic takeover candidate for many larger firms that don't have effective security offerings ... so there's always that takeover potential as well. And I suppose one can't rule out private equity, either, though SCUR does carry a bit of debt (about 15% of market cap, last time I checked) so they're not perhaps the ideal private takeout target.
The company announced that "billings" were a little shy of the forecast when they released earnings last week -- and the earnings were a little disapointing, which was good for shaving about 50 cents off the shares. But it sounds to me like this is potentially an opportunity to buy a long term growth trend at a little bit of a better price. I'll be keeping an eye on these shares for a possibly buy.
Labels: SCUR
This article posted by One Guy @ 4/30/2007 10:47:00 AM 1 comments
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