We recently compiled a list of the 12 Most Undervalued Cybersecurity Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Science Applications International Corporation (NASDAQ:SAIC) stands against the other undervalued cybersecurity stocks.
With businesses facing a significantly complex cyber threat landscape, it is of utmost importance to stay ahead of trends in cybersecurity. Industry experts believe that, in 2025, the integration of AI in threat detection and acceleration in post-quantum encryption should define the landscape of the broader cybersecurity industry. Splashtop reported that the transition to a Zero-Trust framework demonstrates a significant shift in cybersecurity, emphasizing continuous verification and minimal access to enhance overall network security.
Global X Cybersecurity ETF saw an increase of more than 20% over the past year. What has led to this rally? Given the recent adoption of AI technology, market experts believe that the need for cybersecurity is significantly important. With several companies integrating GenAI into their operations, there has been a significant increase in cyberattacks. This led to increased demand for product offerings of cybersecurity companies.
Cybersecurity Industry- The Road Ahead
As per Fortune Business Insights, the global cybersecurity market size was pegged at US$172.24 billion in 2023. This market should grow from USD 193.73 billion in 2024 to USD 562.72 billion by 2032, demonstrating a CAGR of 14.3%. Furthermore, the US cyber security market should see strong growth, touching an estimated value of US$166.73 billion in 2032. This should stem from an increased number of e-commerce platforms. The strong adoption of enterprise security solutions in manufacturing, BFSI, and healthcare should fuel market growth up to 2032.
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Prevention of Cyberattacks
As per EIN Presswire, the quicker expansion of the Internet of Things (IoT) offers a significant opportunity for the broader cybersecurity market. As IoT devices—which range from smart home appliances to industrial sensors— become critical to business operations, there seems to be an increased requirement for effective cybersecurity measures. Several devices often lack strong security protocols. This leads to hacking, unauthorized access, and exploitation.
EIN Presswire added that, amidst these challenges, the cybersecurity industry has a unique opportunity to develop specialized solutions established to secure the IoT ecosystem effectively. This might consist of implementing advanced encryption protocols to protect data transmission, and developing device authentication mechanisms so that only authorized devices can connect to the network. Also, intrusion detection systems can be deployed tailored to monitor and protect against threats related to interconnected devices.
NGFWs (Next Generation Firewalls) protect against evolving practices that use AI to bypass traditional defences, as per Juniper Research. It added that the network layer is the most critical element of IoT networks to protect, with more than 45% of global cybersecurity spending inclined towards protecting the network layer in 2025.
Our Methodology
To list the 12 Most Undervalued Cybersecurity Stocks to Buy According to Hedge Funds, we sifted through numerous online rankings and combed through cybersecurity-focused ETFs, such as First Trust NASDAQ Cybersecurity ETF and Amplify Cybersecurity ETF. After getting an initial list of 25-30 stocks, we extracted the ones trading lower than the forward P/E of ~20.0x, as of November 20. Finally, the stocks were ranked in ascending order of their hedge fund sentiments, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A DOD assistant presenting a portfolio of products and solutions from the company, highlighting its expertise in the IT sector.
Science Applications International Corporation (NASDAQ:SAIC)
Forward P/E as of November 20: ~13.4x
Number of Hedge Fund Holders: 25
Science Applications International Corporation (NASDAQ:SAIC) offers technical, engineering, and enterprise information technology (IT) services mainly in the US. The company also provides digital engineering, cybersecurity, and cloud computing, among other solutions.
Xage Security and Science Applications International Corporation (NASDAQ:SAIC) announced a strategic relationship to bring zero-trust security solutions to critical infrastructure and distributed edge, which includes operational technology, IT, and cloud environments.
In a bid to address the increasing demand from the Federal sector to secure distributed edge and cyber-physical environments, Xage Security Gov continues to work with Science Applications International Corporation (NASDAQ:SAIC) to address these needs. This collaboration is expected to accelerate Zero Trust adoption across the public sector.
Furthermore, during Q2 2025, Science Applications International Corporation (NASDAQ:SAIC) was awarded a 5-year (one-year base, plus four, one-year option periods), $206 million recompete to deliver high-quality IT services which are critical to the seamless execution of the Veterans Affairs Financial Services Center’s operations. As per the industry veterans, this effort is expected to support the Financial Services Center in Austin, TX with essential services like infrastructure and application support, cloud services, cybersecurity, and data analytics, among other services.
These developments further strengthen the Science Applications International Corporation (NASDAQ:SAIC)’s position as a leader in addressing the cybersecurity challenges witnessed by government entities and critical infrastructure providers. Heartland Advisors, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“We see a similar opportunity in Science Applications International Corporation (NASDAQ:SAIC), which offers a range of IT services to its customers.
SAIC has faced recent challenges with lower-than-average government contract renewals and lower demand for their IT services, prompting the appointment of new management to address business development concerns. We purchased shares of SAIC in the second quarter on the premise that the new management team, led by a CEO previously with Microsoft, will be able to succeed in two key self-help efforts: increasing the volume of SAIC bids and improving the firm’s below-average industry “recompete rates,” which consist of rebidding on previously awarded expiring government contracts that are typically 5 years in length.
These efforts, coupled with internally focused capital allocation strategies that include dividend growth and active share buybacks, are likely to drive price appreciation for the stock. In the meantime, SAIC shares trade at a modest 13 times forecast earnings with a strong 8% free cash flow/enterprise value yield. Additionally, SAIC’s newly appointed CEO and CFO purchased shares during the quarter — suggesting to us the management team is confident in future prospects at SAIC.”
Overall SAIC ranks 7th on our list of the most undervalued cybersecurity stocks to buy according to hedge funds. While we acknowledge the potential of SAIC as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than SAIC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
