Using Proofpoint for Hand to Hand Combat with the Hackers

NEW YORK (TheStreet) -- If you have never been the victim of a cyber-scam, you are probably a robot.

Advanced technology has blessed our lives in so many ways, but it has also made every single one of us more of a target than ever before. The latest cyber scam comes in the form of an email or "drive-by" download and holds your hard drive for ransom until you pay the phishers. This scam is not only on your computer but your smartphone or any other device that connects to a network. Great.

So how are we supposed to protect ourselves from the dangers that lie everywhere in technology use? This is one of the many reasons why I like Proofpoint (PFPT), a company that offers some powerful solutions for many power players.

Proofpoint is an innovative security-as-a-service vendor that delivers data protection solutions that help organizations protect their data from attack and enable them to effectively meet the complex and evolving regulatory compliance and data governance mandates that have been spawned from highly publicized data breaches.

What's more, Proofpoint recently announced a new product -- the next-generation predictive defense to its Targeted Attack protection solution. This new technology will protects its users from malware and advanced threats in both URLs and email attachments. Just think of all the email users who could use a product like this! So Proofpoint, already ranked a North American Fastest Growing Company (418th) in Deloitte's 2013 Technology Fast 500, has much further to grow.

Headquartered in Sunnyvale, Calif., Proofpoint came public in 2012 at $13 per share. Today it trades at $45 per share and is now a $1.6 billion small-cap tech stock with an aggressive risk profile. Let's test this stock to find out if it's a Best Stock Now.

Performance

The first test the stock must pass on its road to becoming a Best Stock Now is the performance test. I like stocks that are significantly outperforming the market. It did not become public until 2012, so while I normally check a stock's performance over the past one, three, five and 10 years, we only have the past one year of this stock's performance history.

Over the last year this stock has delivered incredible returns of 186% to its shareholders. The S&P 500 by contrast has returned 22.2% over the same time period. Proofpoint gets an overall momentum grade of 'A+'. It is one of the best performing stocks in the market right now.

Valuation

A stock's performance tells us how it's held up in the past. But what about the future? There are no guarantees ever, but we can get a good idea by looking to the valuation of Proofpoint. This is the second of three tests a stock must pass to become a Best Stock Now.

Proofpoint is currently trading with fairly rich price to sales and price to book numbers. The company is not profitable yet, but sales are growing rapidly. It reported 43% revenue growth in its most recent quarter. The five-year consensus growth estimate going forward is 30% per year. Growth like this is not cheap. I currently have a five-year target price on the stock of $70. I see ample upside potential from here.

Stock Chart

The third and final test is the stock chart test. I like companies and stocks that are flourishing in this current market environment. I hate sideways trends that are languishing. I also despise downtrends.

PFPT 50-Day Simple Moving Average Chart
PFPT 50-Day Simple Moving Average data by YCharts

I use one-year charts to size up stocks. As I check out the technical patterns of this stock over the past one year, I see a stock that is currently flourishing. Proofpoint passes my performance, valuation and stock chart test.

Gunderson Stock Grade

Out of 3,836 stocks in my Best Stocks Now database, Proofpoint currently comes in at #56 and earns a Gunderson stock grade of 'A'.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Clients of Gunderson Capital Mgt. are currently long this stock. You can follow me on Twitter for a change in my opinion of Proofpoint.

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