Zscaler (ZS)
Ciberseguridad en la nube (SaaS)
Zscaler operates the leading zero trust security platform by subscription; after the May 2026 guidance cut that sent the stock down 45% from its high, Overvalued at -1% annually, on a business that keeps growing with record non-GAAP profitability but requires close monitoring of guided capex and the deceleration toward fiscal year 2027.
- Price
- $170.35
- Intrinsic value (5y, base)
- $159
- Total annual return (5y)
- -1.4%
- Status (nominal)
- Overvalued
- Margin of safety
- No margin
The essentials
- Trailing-twelve-month revenue of $3,174 million, growing 24.6% year over year but decelerating toward the company's own guidance of 16-17% for fiscal year 2027.
- Stock-based compensation of 24.7% of revenue requires valuing on maintenance free cash flow net of that compensation, not on reported free cash flow.
- 86% of fiscal year 2025's revenue growth came from expansion within existing customers, with a 114% dollar-based net retention rate.
- The guided capex increase to high single digits of revenue compresses the guided free cash flow margin from 26.5-27% to 22.8-23.3% for fiscal year 2026.
- The stock fell 45% from its 52-week high after the May 2026 guidance cut, leaving a limited margin of safety relative to the method's hurdle.
Intrinsic value — two valuation methods
By both methods, the value today (DCF $38 · Multiples $128) is below the market price ($170).
Pillars of the analysis
The verdict — today vs 5 years
Today — expensive, no margin of safety: at $170 trades ~33.5% above its value discounted to today (~$128); the expected return does not even reach the risk-free rate (4.5%).
At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.
The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$79.
Thesis
The business
Zscaler is the leading zero trust security platform, with a wide and stable moat (network effect, patents, switching costs, regulatory certifications) and a 114% dollar-based net retention rate that confirms expansion within the installed base. The business is not yet profitable on a GAAP basis due to the weight of stock-based compensation, although the non-GAAP operating margin reached a record 23% in the third quarter of fiscal year 2026.
The valuation
It is valued at 156× on maintenance free cash flow net of stock-based compensation, the correct metric for a software business with material stock-based compensation (24.7% of revenue) and still-negative GAAP operating income. The five-year value comes from a revenue path that decelerates from the company's own guidance for fiscal year 2027 (16-17%) to 8.5% in year 5, with a 25x exit multiple within the 20x-30x band of the archetype.
The margin of safety
At market price, Overvalued with an expected return of -1% annually over five years (No margin of safety: the price already discounts a demanding scenario.). The price already reflects a meaningful part of the adjustment for the guided deceleration and increased capex announced in May 2026, so today's margin of safety is limited relative to the method's hurdle.
What to watch
The key disconfirmer is whether the guided capex increase (high single digits of revenue) turns out to be structural rather than one-time: if the free cash flow margin does not recover toward the previously guided range (26.5-27%) over the next two to three years, this model's base case path is overstated. The dollar-based net retention rate (currently 114%, down from 116%) and the trajectory of stock-based compensation as a percentage of revenue are the quarterly signals to follow.
Educational / informational. Does not constitute investment advice.