ZS gets a fundamental rating of 4 out of 10. The analysis compared the fundamentals against 278 industry peers in the Software industry. While ZS seems to be doing ok healthwise, there are quite some concerns on its profitability. ZS is valued quite expensive, but it does show an excellent growth.

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

In the past year ZS was profitable.
ZS had a positive operating cash flow in the past year.
In the past 5 years ZS always reported negative net income.
ZS had a positive operating cash flow in each of the past 5 years.

1.2 Ratios

Looking at the Return On Assets, with a value of -0.63%, ZS is in line with its industry, outperforming 53.96% of the companies in the same industry.
ZS has a Return On Equity (-2.07%) which is in line with its industry peers.

		Industry Rank	Sector Rank
ROA	-0.63%
ROE	-2.07%
ROIC	N/A

ROA(3y)-2.49%

ROA(5y)-6.57%

ROE(3y)-11.58%

ROE(5y)-30.47%

ROIC(3y)N/A

ROIC(5y)N/A

1.3 Margins

The Gross Margin of ZS (76.65%) is better than 70.86% of its industry peers.
In the last couple of years the Gross Margin of ZS has remained more or less at the same level.
ZS does not have Profit Margin and Operating Margin available, so we won't be analyzing them here.

		Industry Rank	Sector Rank
OM	N/A
PM (TTM)	N/A
GM	76.65%

OM growth 3YN/A

OM growth 5YN/A

PM growth 3YN/A

PM growth 5YN/A

GM growth 3Y-0.4%

GM growth 5Y-0.23%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

ZS does not have a ROIC to compare to the WACC, probably because it is not profitable.
The number of shares outstanding for ZS has been increased compared to 1 year ago.
The number of shares outstanding for ZS has been increased compared to 5 years ago.
Compared to 1 year ago, ZS has a worse debt to assets ratio.

2.2 Solvency

An Altman-Z score of 4.71 indicates that ZS is not in any danger for bankruptcy at the moment.
The Altman-Z score of ZS (4.71) is better than 73.02% of its industry peers.
The Debt to FCF ratio of ZS is 2.00, which is a good value as it means it would take ZS, 2.00 years of fcf income to pay off all of its debts.
The Debt to FCF ratio of ZS (2.00) is better than 67.63% of its industry peers.
A Debt/Equity ratio of 0.86 indicates that ZS is somewhat dependend on debt financing.
ZS's Debt to Equity ratio of 0.86 is on the low side compared to the rest of the industry. ZS is outperformed by 73.38% of its industry peers.
Although ZS does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.

		Industry Rank	Sector Rank
Debt/Equity	0.86
Debt/FCF	2
Altman-Z	4.71

ROIC/WACCN/A

WACC10.86%

2.3 Liquidity

ZS has a Current Ratio of 1.82. This is a normal value and indicates that ZS is financially healthy and should not expect problems in meeting its short term obligations.
ZS has a Current ratio (1.82) which is comparable to the rest of the industry.
ZS has a Quick Ratio of 1.82. This is a normal value and indicates that ZS is financially healthy and should not expect problems in meeting its short term obligations.
ZS has a Quick ratio (1.82) which is comparable to the rest of the industry.

		Industry Rank	Sector Rank
Current Ratio	1.82
Quick Ratio	1.82

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WACC

Debt/Equity

How to determine the health of a company

Altman-Z score

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3. Growth

3.1 Past

The Earnings Per Share has been growing slightly by 5.47% over the past year.
The Earnings Per Share has been growing by 68.71% on average over the past years. This is a very strong growth
The Revenue has grown by 23.24% in the past year. This is a very strong growth!
Measured over the past years, ZS shows a very strong growth in Revenue. The Revenue has been growing by 44.03% on average per year.

EPS 1Y (TTM)5.47%

EPS 3Y68.14%

EPS 5Y68.71%

EPS Q2Q%24.68%

Revenue 1Y (TTM)23.24%

Revenue growth 3Y34.82%

Revenue growth 5Y44.03%

Sales Q2Q%25.5%

3.2 Future

Based on estimates for the next years, ZS will show a quite strong growth in Earnings Per Share. The EPS will grow by 19.81% on average per year.
Based on estimates for the next years, ZS will show a very strong growth in Revenue. The Revenue will grow by 20.01% on average per year.

EPS Next Y19.74%

EPS Next 2Y18.63%

EPS Next 3Y19.33%

EPS Next 5Y19.81%

Revenue Next Year23.95%

Revenue Next 2Y21.61%

Revenue Next 3Y20.67%

Revenue Next 5Y20.01%

3.3 Evolution

The estimated forward EPS growth is still strong, although it is decreasing when compared to the stronger growth in the past years.
Although the future Revenue growth is still strong, it is not able to hold up the even more excellent growth rate of the past years.

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4. Valuation

4.1 Price/Earnings Ratio

With a Price/Earnings ratio of 57.64, ZS can be considered very expensive at the moment.
Compared to the rest of the industry, the Price/Earnings ratio of ZS is on the same level as its industry peers.
The average S&P500 Price/Earnings ratio is at 28.30. ZS is valued rather expensively when compared to this.
With a Price/Forward Earnings ratio of 43.33, ZS can be considered very expensive at the moment.
The rest of the industry has a similar Price/Forward Earnings ratio as ZS.
ZS's Price/Forward Earnings ratio indicates a rather expensive valuation when compared to the S&P500 average which is at 25.57.

		Industry Rank	Sector Rank
PE	57.64
Fwd PE	43.33

4.2 Price Multiples

ZS's Enterprise Value to EBITDA is on the same level as the industry average.
ZS's Price/Free Cash Flow ratio is a bit cheaper when compared to the industry. ZS is cheaper than 62.95% of the companies in the same industry.

		Industry Rank	Sector Rank
P/FCF	37.61
EV/EBITDA	3195.63

4.3 Compensation for Growth

The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
ZS's earnings are expected to grow with 19.33% in the coming years. This may justify a more expensive valuation.