My thesis for VRNS focuses on the ongoing transition of the business towards its SaaS model, which I believe will enhance the earnings quality and therefore receive a premium in valuation multiple. SaaS accounted for 58% of new and upsell business for VRNS in 2Q23, marking another quarter of progress in the company’s transition to SaaS. This number has doubled over the previous quarter, and it is well above the target of 35% of net-new annual recurring revenue. Since VRNS’ SaaS solution has achieved 80% feature parity with its on-premise solution, I anticipate a smooth and continuing transition. Furthermore, management anticipates parity to be achieved in the coming quarters.
My model assumptions are that growth will accelerate over the next 2 years as the SaaS transition gains further traction and VRNS benefits from the increase in pricing. This should naturally drive a higher multiple, closing the gap between itself and peers that are growing much faster. These 10 simple stocks can help beginning investors build long-term wealth without knowing options, technicals, or other advanced strategies. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Zacks Earnings ESP (Expected Surprise Prediction) looks to find companies that have recently seen positive earnings estimate revision activity.
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The industry with the worst average Zacks Rank (265 out of 265) would place in the bottom 1%. An industry with a larger percentage of Zacks Rank #1’s and #2’s will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4’s and #5’s. Independent Research Firm report asserts, “Varonis is a top choice for organizations prioritizing deep data visibility, classification capabilities, and automated remediation for data access” Independ…
The improved earnings quality is just one of many advantages of this shift. For instance, now that VRNS hosts for customers, SaaS provides superior remediation at a lower IT cost. Customers won’t have to spend a lot of money or wait a long time to put this into action, https://1investing.in/ which should make it easier for them to adopt. 20 Wall Street equities research analysts have issued “buy,” “hold,” and “sell” ratings for Varonis Systems in the last twelve months. There are currently 1 sell rating, 9 hold ratings and 10 buy ratings for the stock.
Varonis Had a ‘Disaster Quarter.’ Analysts Are Still Bullish.
The idea is that more recent information is, generally speaking, more accurate and can be a better predictor of the future, which can give investors an advantage in earnings season. As an investor, you want to buy stocks with the highest probability of success. That means you want to buy stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Score of an A or a B in your personal trading style. The Style Scores are a complementary set of indicators to use alongside the Zacks Rank. It allows the user to better focus on the stocks that are the best fit for his or her personal trading style. The company is scheduled to release its next quarterly earnings announcement on Monday, October 30th 2023.
VRNS’s beta can be found in Trading Information at the top of this page. A stock’s beta measures how closely tied its price movements have been to the performance of the overall market. Last month’s massive cyberattack is expected to boost demand for cybersecurity offerings.
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Varonis Named a Leader in Data Security Platforms
Style is calculated by combining value and growth scores, which are first individually calculated. The data security and analytics specialist delivered a non-GAAP profit where Wall Street analysts had expected a loss. The tech company’s annual recurring revenue momentum and management’s robust top-line outlook have investors looking up.
The risk in investing in VRNS is that the SaaS transition might take longer than expected, which may disappoint the market when growth expectations are not met. With slower growth, it would also impact the EBIT margin expansion as revenue growth is needed to drive operating leverage. Peers include Zscaler, Qualys, Palo Alto Network, Fortinet, SentinelOne, etc. The median forward revenue multiple peers are trading at is 7.5x forward revenue, and the expected 1Y growth rate is mid-teens to 20+%. When compared to peers, VRNS is still growing much slower as it undergoes the SaaS transition, but growth should inflect higher once this transition ends. Remember that VRNS was growing at 25–30%+ before 2019, so there is precedent for a higher growth rate.
They rarely distribute dividends to shareholders, opting for reinvestment in their businesses. More value-oriented stocks tend to represent financial services, utilities, and energy stocks. The Barchart Technical Opinion widget shows you today’s overally Barchart Opinion with general information on how to interpret the short and longer term signals. Unique to Barchart.com, Opinions analyzes a stock or commodity using 13 popular analytics in short-, medium- and long-term periods.
- We’d like to share more about how we work and what drives our day-to-day business.
- The median forward revenue multiple peers are trading at is 7.5x forward revenue, and the expected 1Y growth rate is mid-teens to 20+%.
- Therefore, I anticipate that SaaS cross-sell will propel robust license adoption in the long run.
- My model assumptions are that growth will accelerate over the next 2 years as the SaaS transition gains further traction and VRNS benefits from the increase in pricing.
Remember that these clients are easy to get in touch with due to the established rapport, so the time required to convert is way less than finding new prospects. Even though VRNS’s primary business strategy remains the sale of SaaS to new customers, positive results from the conversion have been visible in the most recent quarter. Upon renewal in 1Q23, the company saw a couple hundred thousand on-premises customers switch to the SaaS model. Expansion allows Varonis customers to achieve automated data security outcomes while following national standards for data privacy Expansion allows Varonis customers to achieve automated data security… Expansion allows Varonis customers to achieve automated data security outcomes while following data privacy principles Expansion allows Varonis customers to achieve automated data security outcomes wh… Varonis Systems issued an update on its third quarter 2023 earnings guidance on Monday, July, 31st.