Why Cyberark Software Ltd. Stock Jumped 11.1% Today

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What happened

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Shares of Cyberark Software (NASDAQ: CYBR) closed Thursday's trading 11.1% higher, having jumped as much as 12.4% higher earlier in the day. The Israel-based network security specialist reported third-quarter results early in the morning, exceeding Wall Street's projections across the board.

So what

Cyberark's third-quarter sales rose 18% year over year, stopping at $64.8 million; analysts would have settled for $63 million. On the bottom line, adjusted earnings fell from $0.33 to $0.25 per diluted share -- but the Street was only expecting a $0.19 profit per share.

Looking ahead, management expects fourth-quarter revenues to land near $76 million while adjusted earnings should stop near $0.36 per share. Achieving these targets would match Wall Street's current view of the fourth quarter.

Now what

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In a prepared statement, Cyberark CEO Udi Mokady explained that the strong results rested on both new contracts and additional sales to existing customers. And the company is laying the groundwork to boost its global sales capacity in the coming years: "We are making early progress executing our strategy to globalize the sales organization, which we believe will position us to capitalize on the long term opportunity for Privileged Account Security," Mokady said.

That's Cyberark's term for an integrated solution that secures a company's network and computing assets against so-called privileged attackers, meaning hackers or insiders with access to high-level credentials. Not many companies specialize in this particular threat situation, which can wreak havoc even in hardened and well-managed IT systems.

That being said, Cyberark is not a cheap stock, as it trades for 59 times adjusted earnings and 27 times free cash flow today. Investors are betting that the company's tremendous top-line growth will continue its skyrocketing trend. I'm comfortable with waiting on the sidelines as Cyberark builds a long-term plan for sustainable profits, but there's also nothing wrong with getting excited about this company's terrific sales growth.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends CyberArk Software. The Motley Fool has a disclosure policy.

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