Why Varonis Systems Inc's Stock Skyrocketed 25% in a Quarter
Varonis Systems Inc (NASDAQ:VRNS), a leading cybersecurity vendor, has seen a significant surge in its stock price over the past quarter. The company's shares have gained 25% over the past three months, with a 6.96% increase in the past week alone. Currently priced at $32.85, the stock has a market cap of $3.6 billion. Despite this impressive performance, the stock's GF Value of $54.31 suggests that it is significantly undervalued. This is consistent with the stock's valuation three months ago, which also indicated significant undervaluation with a GF Value of $57.54.
Unpacking Varonis Systems Inc
Founded in 2004 and publicly listed in 2014, Varonis Systems Inc operates in the software industry, specializing in data privacy and security. The New York-based firm is currently transitioning its on-premises customers to its cloud products, which are delivered as software-as-a-service. This strategic shift towards cloud-based products is expected to enhance the company's market position and drive future growth.
Profitability Analysis
Despite its impressive stock performance, Varonis Systems Inc's profitability rank stands at 3 out of 10, indicating a relatively low level of profitability. The company's operating margin is -24.23%, which is better than 24.06% of companies in the industry. Its ROE and ROA stand at -23.17% and -11.19% respectively, outperforming 23.8% and 28.2% of companies in the sector. However, its ROIC of -57.64% is only better than 12.46% of companies, indicating a need for improvement in cash flow generation relative to capital investment.
Growth Prospects
Varonis Systems Inc's growth rank is 6 out of 10, suggesting moderate growth. The company's 3-year and 5-year revenue growth rates per share are 15.70% and 9.50% respectively, outperforming over 60% of companies in the industry. Its future estimated total revenue growth rate stands at 10.94%, better than 48.2% of companies. However, the company's 3-year and 5-year EPS without NRI growth rates are -9.40% and -46.70% respectively, indicating a need for improvement. On a positive note, the company's future estimated EPS without NRI growth rate is 49.81%, outperforming 94.21% of companies.
Major Stockholders
The top three holders of Varonis Systems Inc's stock are Ron Baron (Trades, Portfolio) with 972,009 shares (0.89%), Jim Simons (Trades, Portfolio) with 586,300 shares (0.53%), and Baillie Gifford (Trades, Portfolio) with 26,782 shares (0.02%). Their significant holdings indicate a strong belief in the company's potential and strategic direction.
Competitive Landscape
Varonis Systems Inc operates in a competitive industry, with major competitors including Nutanix Inc (NASDAQ:NTNX) with a market cap of $9.35 billion, Engagesmart Inc (NYSE:ESMT) with a market cap of $3.51 billion, and Wix.com Ltd (NASDAQ:WIX) with a market cap of $4.83 billion. Despite the intense competition, Varonis Systems Inc's strategic shift towards cloud-based products and its undervalued stock present potential opportunities for investors.
Conclusion
In conclusion, Varonis Systems Inc's stock has seen a significant surge over the past quarter, with a 25% gain. Despite this, the stock remains significantly undervalued according to its GF Value. While the company's profitability rank is relatively low, its growth prospects are promising, particularly with its transition to cloud-based products. However, investors should also consider the company's competitive landscape and the performance of its major stockholders when making investment decisions.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
