Zscaler Inc (ZS, Financial), a leading software-as-a-service firm, has seen a significant surge in its stock price over the past quarter. With a current market cap of $24.86 billion and a price of $168.93, the company's stock has gained 5.14% over the past week and an impressive 15.42% over the past three months. According to the GF Value, which currently stands at $444.99, the stock is significantly undervalued. This suggests that there is still substantial room for growth, making it an attractive option for value investors. The GF Value, defined by GuruFocus.com, calculates a stock's intrinsic value using historical multiples, past performance adjustments, and future business estimates.
Company Overview: Zscaler Inc
Zscaler Inc is a software-as-a-service firm that provides cloud-native cybersecurity solutions primarily to enterprise customers. The company's offerings can be broadly divided into Zscaler Internet Access, which provides secure access to external applications, and Zscaler Private Access, which provides secure access to internal applications. Headquartered in San Jose, California, Zscaler went public in 2018 and has since established itself as a key player in the software industry. 
Profitability Analysis
Despite its impressive stock performance, Zscaler's profitability rank stands at 3/10, indicating that the company's profitability is relatively low compared to other companies in the industry. As of July 31, 2023, the company's operating margin was -14.04%, better than 29.1% of the companies in the industry. The company's ROE and ROA were -35.38% and -6.52% respectively, while its ROIC stood at -13.87%. These figures suggest that Zscaler has room for improvement in terms of profitability. 
Growth Prospects
Despite its profitability challenges, Zscaler has demonstrated strong growth potential. The company's growth rank is 8/10, indicating robust growth in terms of revenue and profitability. The company's 3-year and 5-year revenue growth rates per share stand at 49.60% and 34.80% respectively, outperforming 92.61% and 93.16% of the companies in the industry. Furthermore, the company's projected total revenue growth rate for the next 3 to 5 years is 26.57%, better than 91.04% of the companies in the industry. However, the company's 3-year and 5-year EPS without NRI growth rates are -16.30% and -41.80% respectively, indicating that the company needs to improve its earnings performance. 
Top Holders of Zscaler Stock
Among the top holders of Zscaler's stock are renowned investors Jim Simons (Trades, Portfolio), Ron Baron (Trades, Portfolio), and Ken Fisher (Trades, Portfolio). Jim Simons (Trades, Portfolio) holds the largest stake with 620,700 shares, representing 0.43% of the company's total shares. Ron Baron (Trades, Portfolio) follows with 128,952 shares, accounting for 0.09% of the total shares, while Ken Fisher (Trades, Portfolio) holds 12,214 shares, representing 0.01% of the total shares.
Competitive Landscape
Zscaler operates in a highly competitive software industry. Its main competitors include VeriSign Inc (VRSN, Financial) with a market cap of $21.36 billion, Fleetcor Technologies Inc (FLT, Financial) with a market cap of $18.75 billion, and Cloudflare Inc (NET, Financial) with a market cap of $21.34 billion. These companies pose significant competition to Zscaler in terms of market share and technological innovation.
Conclusion
In conclusion, Zscaler Inc has demonstrated impressive stock performance over the past quarter, with a significant surge in its stock price. Despite its profitability challenges, the company has strong growth potential, as indicated by its high growth rank and robust revenue growth rates. However, the company operates in a highly competitive industry and faces significant competition from other software companies. Therefore, while Zscaler presents an attractive investment opportunity, investors should carefully consider the company's profitability challenges and competitive landscape.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
