3 Top Cybersecurity Stocks to Buy in August

The recent CrowdStrike failure -- in which millions of computers were rendered temporarily useless -- is causing some investors to reflect on cybersecurity stocks . But while CrowdStrike's software error may worry investors who are considering entering the industry, I think there's another takeaway from the disaster: Every company is dependent on cybersecurity.

There's been a 75% increase in cloud-computing intrusions over the past year, and with so many threats, cybersecurity companies are more important than ever. Here are three worth buying right now.

1. Zscaler

Zscaler 's (NASDAQ: ZS) cybersecurity offerings are built on a "zero-trust" premise where each login and everyone trying to access apps and services is viewed as a potential threat.

Zscaler CEO Jay Chaudhry highlighted the reason for this approach, saying, "The last three decades of the security industry have been centered around firewalls, which are no longer effective in today's cloud, mobile, and AI world."

Zscaler just reported strong third-quarter results (which ended on April 30), posting its first quarterly profit. Net income was $19.1 million, and Zscaler's free cash flow (FCF) was also impressive, reaching $123.1 million -- up from $73.9 million in the year-ago quarter.

The company's sales are also on the right track. Revenue jumped 32% in the quarter to $553.2 million, and Zscaler said it signed a multiyear deal with the U.S. Department of Defense worth seven figures.

Zscaler's current price-to-sales ratio (P/S) is 12.9, down significantly from this time last year when it hovered around 16. While not cheap, Zscaler has proven it can attract more customers, and its recent profitable quarter indicates the company is on the right track.

2. Palo Alto Networks

Palo Alto Networks (NASDAQ: PANW) is well-known for its robust firewalls, which have been central to product offerings for years. But in a rapidly shifting cybersecurity market, the company has expanded into cloud-based offerings with its Prisma systems as well as an artificial intelligence-powered Cortex platform.

The company's expanding cloud-based security products are notable because of Palo Alto's scale. The company is an established cybersecurity leader with more than 80,000 enterprise customers. At this size, it can sometimes be difficult for companies to post quarterly results, but Palo Alto recently showed it can still deliver impressive results.

In its Q3 results (ending April 30), its sales rose 15% to $2 billion, and non-GAAP (adjusted) earnings per share (EPS) of $1.32 were up 20% from the year-ago quarter. Management is optimistic that its product offerings will continue driving higher sales and issued revenue guidance of $7.99 billion to $8.01 billion, representing a 16% increase from 2023.

I should mention that Palo Alto's stock isn't cheap, with a price-to-earnings (P/E) ratio of 50, but it's a bit less expensive than its P/E ratio of 63 earlier this year. With its share price slightly cheaper than earlier this year, now could be a good time to pick shares of this cybersecurity leader.

3. Fortinet

Fortinet (NASDAQ: FTNT) is another large cybersecurity player, boasting more than 500,000 clients. Like its competitors, the company is developing more advanced products to keep up with ever-increasing threats.

Fortinet is doing this with its Unified Secure Access Service Edge (SASE) service, which allows customers to extend their security from on-premise to the cloud. SASE accounted for 24% of the company's billings in the first quarter (which ended on March 31), and management says the platform will be a differentiator.

When combined with its current Security Operations and Secure Networking products, management estimates SASE and all of its offerings have a total addressable market that will increase from $150 billion to $208 billion by 2027.

Fortinet's share price slid recently after Q1 billings fell 6.4%. Management addressed the issue, noting the headwind was due to a backlog from last year, which "diminishes throughout the year with no headwind in the fourth quarter."

The recent pullback on Fortinet's stock opens up an opportunity to pick up shares at a discount. Fortinet's P/S ratio is currently 8.3, down from 12.7 around this time last year. With its massive customer base, new opportunities from SASE, and lower share price, I think Fortinet could be a smart buy for investors looking for a long-term cybersecurity play.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike, Fortinet, Palo Alto Networks, and Zscaler. The Motley Fool has a disclosure policy .