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Upside Potential With Cybersecurity Stocks

So the federal government, credit card companies, state governments, and hundreds of large financial services companies are going to need the latest, most sophisticated high-tech cybersecurity systems money can buy. It will create a bonanza of new revenue for the cybersecurity companies who fill these desperately needed orders.

Now you have a better understanding why Intel (INTC) paid $7.7 billion for McAfee a couple of years ago. Intel wanted the proprietary cybersecurity products that McAfee sold, products like anti-virus software, firewalls, intrusion detection and prevention systems, anti-phishing and even application-specific firewall protection programs.

There are two companies on my cybersecurity "radar screen" I want to introduce you to. One is a small dividend payer that works primarily for the U.S. government. The second is a better-known, larger company whose security products target a much wider audience.

Man Tech International (MANT - Get Report) makes cyberproducts for national security programs, the Department of Defense, the intelligence agencies, State and Homeland Security, the Department of Justice, the FBI and NASA, just to name some of their federal government customers.

MANT is a relatively small company (the market cap is $898 million) with a current price-to-earnings (PE) ratio of only 7.78 and a forward PE ratio of 9. The trailing 12-month (TTM) price-to-sales (PS) ratio is also very low at 0.33. Its enterprise value-to-revenue ratio is also remarkably low at only 0.36.

MANT has revenue-per-share (TTM) of over $74, yet the price-per-share as of Friday closed at $24.31. Keep in mind that MANT's book value per share (most recent quarter) was $30.59. The chart below illustrates its one-year price movement, but notice the orange line symbolizing the trajectory of its book value per share growth. MANT Chart MANT data by YCharts

Its delectable 3.5% dividend is easily sustainable, as it represents a payout ratio of only 27%.

MANT is not without some flaws. Its operating and profit margins are an unimpressive 7.5% and 4.22% respectively. One reason for the stock being so far below its 52-week high of $38.19 registered last Oct. 27 invariably has something to do with cutbacks in spending by the federal departments that it sells to.

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