Bhavan Suri, Partner and Co-Group Head of the technology, media and communications sector at William Blair & Company, says the rising incidence of cybercrime creates an opportunity for Splunk Inc (SPLK). He says about one-third of Splunk’s revenue is related to security use cases.
“And they’re certainly growing nicely, at roughly 50% for their security offering, and so they’re benefiting from some of these concerns,” Suri says.
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At first glance, Suri says Splunk’s stock may seem expensive. It is trading at the high 30s on a free cash flow basis, he says.
“But they’re growing free cash flow close to 80%,” he says. “And so if you were to look at that relative to its growth rate, it’s trading at a ratio of less than one. We view it as an attractive valuation because that cash flow growth is sustainable for a few years at least.”
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