Telos Corporation (TLS) in Ashburn, Va., provides solutions for continuous security assurance of personnel, systems, and information to the world's most security-conscious businesses. TLS's offering includes cybersecurity solutions for IT risk management and information security; cloud security solutions to protect cloud-based assets and enable continuous compliance with industry and government security standards; and enterprise security solutions for identity and access management, secure mobility, organizational messaging, and network management and defense.
The company's shares are down 69.6% in price over the past year and 33.5% over the past three months to close yesterday's trading session at $10.50. In addition, it is currently trading 73.4% below its 52-week high of $39.45, which it hit on March 26, 2021.
Furthermore, the company has received a notice of deficiency from NASDAQ over the delayed filing of the annual report. TLS cited delays in finishing its year-end closure and financial reporting process as the principal reasons for delays in evaluating the effectiveness of its internal control over financial reporting.
Click here to checkout our Cybersecurity Industry Report for 2022
Here is what could shape TLS's performance in the near term:
Notice of Deficiency from NASDAQ
This month, TLS announced that it received a notice from the NASDAQ Stock Market on March 17, 2022, notifying the company that it is not in compliance with the periodic filing requirements for continued listing outlined in NASDAQ Listing Rule 5250(c) because its Form 10-K for the fiscal year ended December 31, 2021, had not been filed with the Securities and Exchange Commission by the required due date of March 16, 2022. (1).
Inadequate Financials
TLS' total revenue increased 34.7% year-over-year to $242.43 million for the year ended Dec. 31, 2021. However, its operating loss came in at $41.46 million, compared to an operating income of $297,000 in the prior year. The company's net loss was $43.13 million, while its loss per share amounted to $0.65.
Poor Profitability
TLS' 35.5% trailing-12-months gross profit margin is 27.8% lower than the 49.1% industry average. Also, its ROA, ROC, and net income margin are negative 17.5%, 15.3%, and 17.8%, respectively. And its trailing-12-month cash from operations of $7.26 million is 92.4% lower than the $94.63 million industry average.
POWR Ratings Reflect Uncertainty
TLS has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. TLS has a D grade for Stability which exhibits its higher volatility than peers.
Of the 30 stocks in the F-rated Software – Security industry, TLS is ranked #18.
Beyond what I have stated above, you can view TLS ratings for Quality, Growth, Value, Sentiment, and Momentum here.
Bottom Line
While TLS' efforts to boost its cybersecurity product and services offering bodes well, its negative profit margins and lackluster financials could cause its shares to retreat further in price. In addition, its delayed filing its annual report could further raise concerns over its internal controls. Therefore, we believe the stock is best avoided now.
How Does Telos Corporation (TLS) Stack Up Against its Peers?
While TLS has an overall D rating, one might want to consider its industry peers, Radware Ltd. (RDWR), Trend Micro Incorporated (TMICY), and Qualys Inc. (QLYS), which have an overall B (Buy) rating.
Click here to checkout our Cybersecurity Industry Report for 2022
TLS shares were unchanged in premarket trading Monday. Year-to-date, TLS has declined -31.91%, versus a -6.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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