The turnaround at Infoblox (BLOX) is in full swing. The provider of network automation and DNS security solutions has been working hard to get its act together after going through a rough period in early 2014 caused by elongated deal cycles and a slow ramp for new security-related deployments. From a high of $48.97 in October 2013, Infoblox shares tumbled 76% to the low of $11.67 in July 2014. Last month, the stock hit a new 52-week high of $28.03.

Improving fundamentals are behind the sharp rebound in the shares. Increased network complexity, more private-cloud deployments and the advancement of software-oriented next-generation datacenters are three broad trends behind the demand for Infoblox’s core networking solutions.

It also helps that security has emerged as a significant growth opportunity. Of Infoblox’s 8,100 customers, only about 500 currently use its DNS security solution; that’s just 6% penetration, indicating lots of room for expansion. Infoblox has been successful selling its security products into very large enterprises, as 4 of the Fortune 10 have its offerings.

In May, the company reported fiscal third quarter (ended April) revenue rose 28% year over year (acceleration from 22% growth in the fiscal second quarter), driven by 32% growth in product revenue. The quarter was up against an easy comparable from a year ago, but the performance was still commendable. Revenue of $78.1 million handily beat the consensus estimate of $75.2 million.

Last November, Infoblox management on the fiscal first quarter (ended October) earnings call signaled that the business had taken on a more positive tone, even though product revenue for that quarter had fallen 12.4%. At the time, with the stock trading around $18.25, there were signs sales momentum had turned in the right direction, aided by demand for security kicking in.

Indeed, product revenue in the fiscal second quarter (ended January) rose 20%, thanks in part to increased demand for security solutions, which helped shorten deal cycles and boost overall deal sizes. DNS, a protocol for how computers on the Web and in private networks exchange data, is one of the top attack vectors at the application level. And most network firewalls do not have built-in DNS security functionality.

IT research firm Gartner estimates that DNS firewalls now exist in roughly 20% to 30% of the client deals it reviews, indicating the market is far from saturated. In the April quarter, Infoblox performed 260+ security assessments for clients, a sequential increase of 60%; malware is often found on networks during these assessments.

Once malware gets into a network, the infected code often relies on DNS to communicate with its command-and-control server to extract sensitive data. Rogue users inside the network can also take advantage of DNS to launch internal distributed denial of service (DDoS) attacks from compromised systems.

In May, Infoblox introduced its Internal DNS Security appliance, which protects the DNS from being exploited by infrastructure attacks, malware, advanced persistent threats (targeted attacks) and stolen data. The new offering is a nice complement to Infoblox’s External DNS Security appliance, which protects against broader threats, such as large-scale DDoS attacks, DNS hijacking, DNS-based exploits and reconnaissance attacks.

Security has become a major add-on to Infoblox’s network automation business and now accounts for 11% to 12% of total revenue. The company is in the early part of a refresh cycle for its core DDI appliances. And more customers are deciding to add security when they upgrade their older appliances. On the earnings call covering the April quarter, Infoblox CFO Remo Canessa said the refresh cycle would have a materially positive effect on revenue over the next three to four quarters. For the fiscal fourth quarter (ending July), management offered revenue guidance of $79 million to $81 million, above the consensus at the time of $78.3 million.

Under new CEO Jesper Andersen, who took over in December, Infoblox is focusing more on companies with 10,000 employees or more. DDI requirements are correlated with scale, especially when cloud deployments are involved (more network automation needed). It makes sense to pursue the large enterprise market, which is estimated to have DDI penetration of just 20% (Infoblox has a 50% share). The company normally adds 200 to 250 new customers a quarter.

It’s up to Andersen, a veteran of Cisco Systems (CSCO) and Oracle (ORCL), to effectively lead the management of the new-customer funnel, an area where Infoblox has stumbled before. The current product refresh cycle is bringing in a greater percentage of revenue from existing customers; it’s simply often easier to complete an upgrade deal at an established account. But Infoblox can’t let up on the gas when it comes to adding new accounts because there needs to be an additional growth engine firing to offset any slowdown once the refresh cycle naturally begins to wane.

With the stock up 120% from the July 2014 low, much of the good news surrounding Infoblox is already priced in. At a recent market cap of $1.48 billion, Infoblox trades at 4.9 times the fiscal 2015 (ending July) consensus revenue estimate of $299.6 million (growth of 19.7%).

For fiscal 2016, analysts on average look for a slight deceleration in the company’s top-line growth rate to 18.4%, with revenue expected to come in at $354.7 million. To be conservative, I took that somewhat slower growth into account and used a forward revenue multiple of 4.7 on the FY’16 consensus to generate a price target of $28.95. Recently trading around $25.70, Infoblox shares would be more attractive on a pullback into the low-$20s.

Some large investors have gotten behind the Infoblox story, adding to positions as the stock rebounded. In the first quarter, mutual-fund giant AllianceBernstein bought 2.23 million shares and now owns 2.33 million shares, making it the fourth largest investor in the company. During the March quarter, CastleArk Management (made up of former growth-fund managers at Loomis, Sayles) and Lord, Abbett opened new positions of 476,400 shares and 284,727 shares, respectively. Among Infoblox’s largest holders: Cadian Capital, Wasatch Advisors, Granahan Investment Management and BlackRock Fund Advisors.