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QLYS · Screen
Date: 2026-03-29 Criteria: Single-ticker screen on existing portfolio holding
Company Overview
A portfolio-specific passage was removed from the public build.
Quick Health Check — Fundamentals Analyst
Revenue & Earnings Growth
| Metric | 2022 | 2023 | 2024 | 2025 | 3yr CAGR |
|---|---|---|---|---|---|
| Revenue ($M) | 489.7 | 554.5 | 607.6 | 669.1 | 10.9% |
| Net Income ($M) | 108.0 | 151.6 | 173.7 | 198.3 | 22.4% |
| Diluted EPS | $2.74 | $4.03 | $4.65 | $5.44 | 25.6% |
| FCF ($M) | 174.9 | 235.8 | 231.8 | 304.4 | 20.2% |
Revenue growth is decelerating (13.2% -> 9.6% -> 10.1% YoY), and 2026 guidance of $717-725M implies further deceleration to 7-8%. However, bottom-line and FCF growth remain strong due to margin expansion and buybacks.
Profitability & Margins
| Metric | 2022 | 2023 | 2024 | 2025 | Trend |
|---|---|---|---|---|---|
| Gross Margin | 79.0% | 80.6% | 81.6% | 82.8% | Expanding |
| Operating Margin | 26.7% | 29.4% | 30.8% | 33.2% | Expanding |
| Net Margin | 22.1% | 27.3% | 28.6% | 29.6% | Expanding |
| ROIC | 37.3% | 41.2% | 36.4% | 35.3% | Excellent |
Margins are widening every year — this is a high-quality earnings compounder. 83% gross margins and 33% operating margins are elite for cybersecurity. ROIC consistently above 35%.
Balance Sheet & Capital Allocation
| Metric | Value |
|---|---|
| Total Debt | $52.3M (lease obligations only — zero financial debt) |
| Debt-to-Assets | 4.8% (fortress) |
| Cash + Investments | $696.9M ($250M cash + $196M ST + $251M LT) |
| Net Cash | ~$644.6M (21% of market cap) |
| Shares Outstanding | 35.73M (down from 37.36M in 2022 — -4.4% over 3yr) |
| Capital Allocation | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Buybacks ($M) | 317.3 | 170.8 | 139.9 | 183.4 |
| CapEx ($M) | 24.0 | 8.8 | 12.3 | 5.0 |
| Dividends | None | None | None | None |
Asset-light model with minimal capex needs. Aggressive share buyback program — expanded authorization to $1.6B. All excess cash returned to shareholders via repurchases.
SBC Check
| Metric | Value |
|---|---|
| SBC (2025) | $77.0M |
| SBC / Revenue | 11.5% |
| SBC / FCF | 25.3% |
SBC is elevated relative to FCF. Not ideal, but partially offset by the aggressive buyback program (share count still shrinking net of SBC dilution).
Per-Share Metrics
| Metric | Value |
|---|---|
| FCF/Share (TTM) | $7.26 |
| EPS (TTM) | $5.44 |
| BVPS | $15.71 |
Valuation — Valuation Analyst
Current Multiples
| Multiple | Value | Context |
|---|---|---|
| Trailing P/E | 15.7x | Cheap for cybersecurity |
| Forward P/E | 10.7x | Historically low; sector avg 25-30x |
| P/FCF | 11.8x | Remarkably cheap for 83% gross margin software |
| EV/FCF | ~8.0x | Adjusting for $645M net cash |
| EV/Revenue | ~3.6x | Software value territory |
| P/Sales | 4.6x | Below peer avg |
Enterprise Value Breakdown
- Market Cap: $3,071M
- Less: Net Cash ~$645M
- EV: ~$2,426M
- EV/FCF of 8.0x is extraordinarily cheap for a growing, profitable cybersecurity company
Graham's Intrinsic Value
sqrt(22.5 x $5.44 x $15.71) = $43.85
Graham's Number is well below market price, but this metric is structurally flawed for asset-light software businesses with low book value. Qualys's value is in its recurring revenue and FCF generation, not tangible assets. Low weight to this model.
Bogle Expected Return
- Dividend Yield: 0%
- Earnings Growth (fwd): ~10-12% (EPS CAGR, aided by buybacks even as revenue decelerates)
- P/E Expansion: If P/E mean-reverts from 10.7x toward 15-18x (conservative for cybersecurity), that's +40-70% over 3-5 years from multiple alone
- Bogle Expected Return: ~12-18% annualized over a 3-5 year horizon
Fair Value Range
| Scenario | Method | Fair Value |
|---|---|---|
| Conservative | 12x fwd EPS ($7.31 guided) | $87.72 |
| Base | 15x fwd EPS | $109.65 |
| Optimistic | 18x fwd EPS (still below sector avg) | $131.58 |
| FCF-Based | 15x FCF/share ($7.26) | $108.90 |
| EV + Net Cash | 12x fwd FCF + net cash | ~$130 |
Fair value estimate: $105-130. Current price of ~$86 represents 20-35% discount to fair value.
Why QLYS Sold Off — Sentiment Analyst
The February 2026 Crash (-18% in days)
- Soft 2026 guidance: Revenue guided $717-725M (7-8% growth), decelerating from 10% in 2025. Market wanted 10%+.
- EPS guidance miss: Midpoint $7.31 missed consensus slightly.
- CFO insider sale: CFO dumped ~7,000 shares shortly after earnings — bad optics.
- Broader tech rotation: Cybersecurity names broadly under pressure in early 2026.
What the Market Is Pricing
The stock went from ~$132 (Jan 2026) to ~$86 (today) — a 35% drop in 3 months. The market is pricing in: - Growth deceleration to mid-single digits - Possible loss of competitive positioning to newer platforms - No catalyst for re-rating
What the Market May Be Missing
- FCF is actually accelerating ($232M -> $304M, +31% YoY) even as revenue growth slows
- Margin expansion has room to continue
- $645M net cash = 21% of market cap — significant downside cushion
- Buybacks at these prices are highly accretive ($183M at $86 = ~2.1M shares = 6% of float)
- EV/FCF of 8x essentially prices zero growth — any growth is free
Analyst Consensus
| Rating | Count |
|---|---|
| Strong Buy | 1 |
| Buy | 6 |
| Hold | 15 |
| Sell | 1 |
| Strong Sell | 1 |
Consensus is firmly Hold — street hasn't caught up to the value case. Upgrades could be a catalyst.
Screening Verdict — Manager's Synthesis
Strengths
- Elite profitability: 83% gross margin, 33% op margin, 35% ROIC — tier-1 software economics
- FCF machine: $304M FCF growing 20%+ CAGR, converting at >100% of net income
- Fortress balance sheet: Zero debt, $645M net cash (21% of market cap)
- Shareholder-friendly: Aggressive buybacks shrinking float; shares down 4.4% over 3 years
- Valuation: EV/FCF of 8x and fwd P/E of 10.7x are extraordinary for this quality level
Risks
- Revenue deceleration: 10% -> 7-8% growth. If it drops to 5% or below, re-rating risk
- SBC elevated: 25% of FCF diluted by stock comp
- Competitive pressure: CrowdStrike, Palo Alto, Wiz expanding into vulnerability management
- Small market cap: $3B company competing with $80B+ platforms — could get squeezed
- No dividend: Pure growth/buyback thesis — no income component
Position Context
A portfolio-specific passage was removed from the public build.
Rating: 7.5/10
Strong pass on the screen. QLYS is a high-quality cybersecurity compounder trading at deep value due to a growth scare. The FCF profile, balance sheet, and margin trajectory are excellent. The risk is that growth continues decelerating into mid-single digits, but at 8x EV/FCF, that's already priced in.
A portfolio-specific passage was removed from the public build.
QLYS fills a unique value-cybersecurity slot in the portfolio.
Suggested Next Steps
A portfolio-specific passage was removed from the public build.
Sources: - Simply Wall St — QLYS Down 18% After Soft Outlook - TIKR — Can QLYS Bounce Back to $150? - Sahm Capital — QLYS Valuation After Weaker Outlook - Motley Fool — QLYS CFO Share Sale