Expert in the field of cybersecurity Palo Alto Networks is the name of the company. ‘ ( PANW 7.18% ) The stock price increased by 8% by 11:25 a.m. ET on Tuesday following the company’s better-than-expected sales and earnings performance reported last night, surpassing analyst predictions.
As the fiscal fourth quarter of 2024 came to a close on July 31, analysts had predicted that Palo Alto would generate a profit of $1.41 per share on sales totaling $2.16 billion. However, Palo Alto surpassed expectations by reporting earnings of $1.51 per share and sales of $2.19 billion. Furthermore, Palo Alto provided a positive outlook for the first quarter of 2025 that exceeded analysts’ forecasts.
The financial results of Palo Alto in the fourth quarter.
Despite some positive news, Palo Alto reported a slower growth in sales in the fourth quarter of 2024 compared to the previous year. Although the sales for the full fiscal year increased by 16%, the growth rate decreased to 12% in Q4. Additionally, the adjusted net income of Palo Alto saw a modest growth of 5%, which was even slower than the sales growth.
That is disappointing information. It is important to mention that, when computed following widely recognized accounting standards (GAAP), GAAP In other words, that is to say, not ” adjusted Palo Alto excluded certain expenses that were considered non-recurring, resulting in adjusted earnings per share of $1.01 instead of $1.51. However, this adjusted amount represented a 58% increase in GAAP profit compared to the previous quarter’s earnings for Palo Alto.
That figure was a significant amount. better faster than the rate at which Palo Alto’s earnings are increasing.
Should one consider buying Palo Alto stock?
Wall Street was well aware of this fact. two dozen different investment banks have different specialties increased the set goals for prices When it comes to Palo Alto stock, do you think the increase in stock price could be a contributing factor? I believe so too.
Furthermore contributing to the increase in Palo Alto’s stock price is the company’s outlook. Referring to the robust revenue growth, solid cash flow, and expansion of non-GAAP operating margin, Palo Alto forecasted a 12% or higher sales growth in the first quarter, and a 13% or higher increase by the end of the year. Particularly noteworthy is the management’s projection for free cash flow, suggesting it may reach around $3.5 billion with $9.1 billion in sales.
What does this signify for the assessment of value? If management achieves those goals, it suggests a future perspective. The ratio of the price of a stock to its free cash flow. With a price-to-earnings ratio of almost 35 times, Palo Alto stock appears overvalued even after exceeding earnings expectations today with modest revenue growth in the low teens. Hence, it is not advisable to purchase the stock at this high valuation.
