Corero Network Security – this specialist could treble profits this year, then jack up at least another 50% next year, on 97% ARR – shares now at 16.10p, brokers value 24p

01.04.2025

It is a very rare occasion when I look to feature a company trading on over 220 times historic earnings – however I now suggest that risk-tolerant investors could do well by taking a view today on the shares of Corero Network Security (LON:CNS), now just 16.10p.

The Business

Listed on both AIM and on the US OTC Markets, Corero provides best-in-class automatic detection and protection DDoS solutions with network visibility, analytics, and reporting tools.

Its technology protects against external and internal DDoS threats in complex edge and subscriber environments, ensuring internet service availability.

Headquartered in London, the group has operational centres in Massachusetts, USA, and Edinburgh.

Leader in advanced distributed denial of service protection and mitigation security solutions for any architecture.

It specialises in delivering intelligently-tailored automated DDoS protection with robust, real-time defence against a broad spectrum of internal and external cyber-attacks in under one second.

Corero safeguards critical infrastructure across diverse deployment models - from inline to edge to hybrid cloud - and is currently developing CORE, an observability and resiliency ecosystem to unify defensive actions across the modern threat landscape.

The group’s global customer base includes internet service providers, hosting providers, SaaS providers, cloud providers, and edge providers.

This Morning’s 2024 Results

The group reported that the year to end-December 2024 saw a 10% increase in revenues to $24.6m ($22.3m), while its EBITDA grew 42% to $2.5m ($1.8m), while its pre-tax profits turned around from a $0.2m loss to a $0.6m profit.

Its annual recurring revenues improved by 16% to $19.5m ($16.9m), while its order intake was up 13% to $28.2m ($24.8m), it reported a 97% customer retention figure.

Management Comment

CEO Carl Herberger stated that:

"I am delighted with the performance of Corero across 2024; we have made significant progress in both further developing our product stack alongside aggressively expanding our go-to-market strategy.

Corero has always had a strong reputation for product innovation and service excellence, and I am pleased to report that our teams are taking that to a whole new level. In addition to creating new products, we've invested heavily across our sales and marketing functions, alongside broadening both our customer and geographical reach.

I'm excited about Corero's prospects for 2025 and the impact of deepening our channel and alliance partner relationships in addition to extending our reach globally.

The global demand for our products is strong and Corero remains well placed to capitalise on this sizeable and growing market opportunity."

The Equity

There are some 512.2m shares in issue.

The larger holders include Jens Montanana (36.57%), CFM Indosuez Wealth (11.75%), Sabvest Capital Holding (11.75%), Juniper Networks (9.60%), Herald Investment Management (8.73%), Bank Julius Bar (7.39%), Richard Koch (5.80%), Pershing (4.58%), and Investec Bank Switzerland (3.91%).

Broker’s Views

Analysts Bob Liao and Charlie Williams, at Zeus Capital, have an equity value per share of 24p in their latest note on the group.

They estimate that the current year to end-December 2025 will see revenues rise to $28.8m ($24.6m), while pre-tax profits could more than treble to $1.9m ($0.6m), lifting earnings to 0.37c (0.10c) per share.

For the 2026 year the analysts look for $32.6m revenues, $2.9m profits and 0.57c per share in earnings.

They note that continued sales momentum and maturing margins could drive earnings outperformance and rerate Corero as a high-growth, high-margin SaaS company. 

Furthermore, the analysts suggest that:

“If the financial markets do not recognise this value, we believe private buyers may.

In particular, we believe Corero, as a niche provider with market leading technology, could be highly attractive to a strategic buyer seeking to broaden its product portfolio.”

Analysts Kai Korschelt, Hayley Palmer and Tom Like, at Canaccord Genuity Capital Markets, rate the shares as a Buy, with a 24p Target Price.

My View

At these share price levels, 16.10p, this group’s PE drops from 221.3 times last year to 58.8 times this year and just 38.0 times next year.

I just love to see this type of corporate push and upon such a high annual recurring revenue rate too.

There is a lot more to be produced by this £82.5m-capitalised group, I see the shares heading back up over the 20p level fairly soon, with a trading range between 20p/24p developing possibly before the group’s AGM in June.

I now set an easy 21p Target Price for the shares.

(Profile 14.04.20 @ 4.2p set a Target Price of 6.5p*)

(Profile 01.04.25 @ 16.10p set a Target Price of 21p)

(Asterisks * denote that Target Prices have been achieved since Profile publication)