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When Should You Buy Varonis Systems, Inc. (NASDAQ:VRNS)?

Simply Wall St

Varonis Systems, Inc. (NASDAQ:VRNS), which is in the software business, and is based in United States, saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Varonis Systems’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Varonis Systems

What's the opportunity in Varonis Systems?

According to my valuation model, Varonis Systems seems to be fairly priced at around 17% below my intrinsic value, which means if you buy Varonis Systems today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $96.85, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, Varonis Systems’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will Varonis Systems generate?

NasdaqGS:VRNS Past and Future Earnings, January 13th 2020

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -7.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Varonis Systems. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? VRNS seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on VRNS for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on VRNS should the price fluctuate below its true value.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Varonis Systems. You can find everything you need to know about Varonis Systems in the latest infographic research report. If you are no longer interested in Varonis Systems, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.