$ZS — WATCHLIST 📊 | 6 MONTHS THESIS

$ZS — WATCHLIST 📊 | 6 MONTHS THESIS 🧭 Conviction: MED 🎯 FQ3 FY2026 (ends Apr) | reported May 26 | Rev $850M | EPS $1.08 vs $1.01 🟢 | Margin -3.5% 💡 Consensus expects rapid margin expansion and sustained 25%+ growth. Our variant view is that structural R&D and S&M costs will keep GAAP margins negative longer than the market prices in, and revenue growth may decelerate toward 20%, leading to multiple compression from the current rich levels. 🏢 Business Quality: 7/10 📊 Valuation: rich — trailing non-GAAP P/E 30.6x, P/S 25x, EV/Sales 24x. For a company with -3.5% operating margin and 25% growth, this is above the 10-15x revenue... 🔮 Catalyst: next quarterly earnings ⚖️ Watchlist: ZS’s growth is real but valuation is rich, and no clear near-term catalyst exists to reprice the stock higher. Wait for a pullback or a data point that clarifies the margin trajectory.

🧭 Conviction: MED