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If you were a bank, would you rather have to pay millions to Palantir, FICO, Dow Jones, Microsoft, and ThetaRay to solve 5 individual cybersecurity or compliance problems, or hire just one company to solve them all on its own?

Banks process trillions of dollars in financial transactions every day, and there’s no end to the regulatory hoops they jump through or the hackers they must defend against.

And they have to hire multiple companies to handle individual aspects like data analytics, investigations, onboarding, screening, security, and more.

Of course, there are plenty of companies out there that can solve those individual issues for banks. But they might need to hire a bunch of them to tackle all the problems.

Today, we want to talk about a stock that can address all of those compliance and cybersecurity needs on its own.

HUB Cyber Security (HUBC) is the company’s name, and their wheelhouse is banking technology. 

We’re going to walk you through HUBC’s competitive advantages and explore its value as an investment opportunity.

We’ll cover how:

Let’s begin.

When a bank is getting all of its data management, customer verification, and cybersecurity systems set up, it might have to solicit the services of as many as seven different major companies to get it all done.

That’s going to cost a ton of money. And not only is it expensive, but the bank will also have to make sure that the systems can all communicate with one another, or the whole thing falls apart.

These kinds of expenses are considered normal in the industry. 

And the fact that a bank would need to talk with up to seven different companies just to get up and running makes it especially interesting to us that HUBC can do all of the tasks on its own.

Take a look at this chart to get a visual idea of the value HUBC can potentially provide to banks:

Note the names on the right side. These are not small companies that HUBC is outdoing. Palantir, FICO, Dow Jones, Microsoft, and ThetaRay are all great companies, but when faced with the choice of either hiring all five of them for one capability each or just hiring HUBC, banks might have to go with the more efficient choice.

See a further breakdown of what HUBC does for banks →

When evaluating a company’s business model, one thing we like to check is the list of clients they’re already serving.

Here are some of HUB Cyber Security’s bigger client names:

The company isn’t content to just rest on the big names that it’s serving and call it a day, though. 

HUBC has a clear plan for how to grow their business by leveraging their current network of tier-1 bank relationships. But the plan isn’t to use top-tier bank names to land more top-tier banking clients.

It’s to leverage their current client list to open doors with mid- and small-sized banks. Think regional and mid-market clients.

As far as HUBC’s product strategy with this mid-to-small-bank market goes: the general idea is to make a deployment model for their software (see below) that’s tailored to small banks, then use their solutions to upgrade and transform those banks’ security and compliance systems. 

The endgame is just to provide them with excellent customer service in the long run.

It’s a simple, straightforward plan, and simple tends to be smart (even when dealing in millions of dollars).

Let’s dig more into the financial side of things, though.

HUBC brings a scalable, high-margin model to the table that’s already bringing in $31.5M in revenue.

After transitioning to a software-first approach, HUBC began producing 80%+ margins.

The main software that they provide is called SDF, or Secured Data Fabric, and it’s a platform that provides data management and computing solutions to banks and other financial institutions.

SDF can reduce compliance costs for banks by up to 50%, and its nature as software allows HUBC to continue scaling quickly.

Which is great, because HUBC’s total addressable market (TAM) is $12.9B. 

SDF can capture, filter, and automatically process any type of data from any source; apply AI to understand, analyze and exploit data; and unify all policies and business logic in a single location.

Translation: It’s a very convenient all-in-one software for banks, and its AI integrated from the ground up.

And another thing to note: it’s not that HUBC is doing any one thing that’s never been done before. It’s that the company is providing 7 (or more) major banking solutions in one platform that’s AI-native and AI-compliance-ready, which is a huge deal right now when tons of banks want to implement AI (but safely).

Learn more about HUBC’s prospects →

So, how have other companies fared in this industry compared to where HUBC is at right now?

You’ll see some more big names in the chart below, and you’ll also note that HUBC’s market cap is extremely low compared to them.

It’s interesting to note that many of these companies only specialize in one of the many solutions that HUBC provides. Of course, some banks will choose Palantir over HUBC, but that will only be the banks who can afford it. And which banks is HUBC targeting? The small ones, who don’t have Palantir money.

It’s not just the market cap difference here that’s shocking (example: Palo Alto has 4180x the market cap of HUBC currently).

HUBC’s EV/Revenue, or enterprise value-to-revenue multiple, is only 0.65, while the lowest of the other comparable companies is at 7.3x. What does that mean?

It shows how much investors will pay for each dollar of a company's sales. This metric is particularly useful for evaluating companies that aren’t profitable yet. This can be a signal of undervaluation. This is not financial advice, and you should always do your own research.

And another stat that’s interesting is revenue growth. HUBC obviously has the highest revenue growth on both tables above (besides Databricks), but that’s to be expected for a potential up-and-comer. The Palantirs and Palo Altos of the world have done their hyperscaling already, and it would be concerning if HUBC’s revenue growth wasn’t impressive (which it is).

HUBC presents an interesting opportunity and makes a strong case for its own usefulness in the banking industry. Something we like about it is that it seems self-aware of why its software is valuable and also (crucially) who it should try to sell that software to. A company can have a great product, but if it’s trying to shoot for acquiring global, tier-1 clients when the real market fit might be in smaller businesses and banks, it likely won’t get anywhere.

As always, do your own research, and none of the above is financial advice. 

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