Cybersecurity shares have been somewhat resilient to the Covid-19 pandemic, and for a good reason. Despite the economic slowdown, the situation has pushed many governments, businesses and individuals to go online. As such, the adoption of new security measures against cyber crimes was inevitable.
Cybersecurity is a necessity
Avast is a widely known antivirus company with a full range of protection solutions for individuals and large businesses. This dividend-paying stock has been on a great run since its IPO in July 2017, and ever since Covid-19 has taken centre stage, the Czech cybersecurity software company has actually seen an increase in its business volume.
Avast has a £5.39bn market capitalisation, which means it has a functional role in hedge funds and large-scale investments. Another crucial factor why I’d buy this cybersecurity share right now is that just four months ago, the company joined the prestigious FTSE 100 index.
Overall, Avast has an impressive YTD return of 10% and 1Y return of 30% at the time of writing. Further, as many companies scrapped payouts to shareholders amid the Covid-19 crisis, Avast has proposed to pay a final dividend of 4.8 cents per share in October 2020. These factors make Avast one of the best growth and dividend stocks out there in the market in my opinion.
BAE Systems is a massive aerospace global company that develops, among other services, cybersecurity and intelligence technology. Its shares have dropped about 15% since the beginning of the year and around 27% from the yearly peak of 669p in February. Plus, it still has debt issues and had to sell $2bn bonds to refinance debt.
Looking ahead, however, it’s not all gloomy for BAE Systems . BAE’s earnings come from long-term military contracts that ensure a flow of steady income. At the same time, the British company also strives to grow its business with new contracts and the development of new technologies. Recently, BAE Systems unveiled the next-generation cyber protection suite for military vehicles, known as the Fox shield. Then, for the fourth consecutive time, BAE Systems was awarded an £87m Archerfish mine neutralizer contract with the US Department of Defense.
What’s more, the company’s P/E ratio of 12.79, which is below the industry average, implies that the stock is trading at a relatively cheap price. And despite the company’s warning of lower Q2 earnings due to the Covid-19 disruption, the results were not that bad – half-year profits dropped by 11% but BAE expects sales to increase by around 5% by the end of the year.
All in all, BAE Systems’ shares looks like a good deal to me.
Is now the right time to buy cybersecurity shares?
Given the current situation of the Covid-19 global pandemic, any work-from-home related-stock has big potential. In my opinion, Avast seems to be the better investment of these two cybersecurity shares, largely due to its healthy balance sheet, the expected increase in users (currently Avast has around 435 million users), and the certainty of dividend income for investors.
Tom Chen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.