Is Varonis Systems a Worthwhile Cybersecurity Stock to Invest In?

NASDAQ: VRNS | Varonis Systems, Inc. News, Ratings, and Charts

VRNS – Varonis Systems (VRNS) reported a healthy increase in its subscription revenue for the quarter ended March 31, 2022, and analysts expect its EPS and revenue to grow in fiscal 2022 and 2023. However, given the company’s lower-than-industry profitability and stretched valuation, is the stock a wise bet now? Read on to learn our view.

Varonis Systems, Inc. (VRNS) in New York City is a data security and analytics provider. The company’s software products and services allow enterprises to manage, analyze, alert, and secure enterprise data. It is focused on protecting enterprise data, including sensitive files and emails; confidential customer, patient, and employee data; financial records; strategic and product plans; and other intellectual property.

VRNS’ revenue increased 29% year-over-year in its last reported quarter, beating analysts’ $95.98 million estimate. The company has forecasted its full-year revenue to be between $485 million and $490 million. The low end of the company’s revenue guidance for fiscal 2022 falls short of analysts’ $489.30 million estimate. This can be attributed to a write-off of its Russia business, which is expected to hamper its revenue and annual recurring revenues.

VRNS’ stock has declined 27.9% in price year-to-date and 26.7% over the past year to close the last trading session at $35.17. It is currently trading 52.1% below its 52-week high of $73.46, which it hit on Sept. 7, 2021.

Here is what could influence the performance of VRNS in the coming months:

Mixed Financials

VRNS’ total revenues increased 29% year-over-year to $96.26 million for the first quarter, ended March 31, 2022. The company’s subscription revenues increased 53% year-over-year to $68.98 million. Also, its non-GAAP operating loss increased 25.3% year-over-year to $7.89 million. In addition, its operating loss increased 41% year-over-year to $48.08 million.

Favorable Analyst Estimates

Analysts expect VRNS’ revenue for its fiscal 2022 and 2023 to increase 25.1% and 22.3%, respectively, year-over-year to $488.11 million and $596.72 million. Also, its earnings for its fiscal 2022 and 2023 are expected to increase 30.8% and 111.8%, respectively, year-over-year to $0.17 and $0.36 per share. It surpassed the Street’s EPS estimates in each of the trailing four quarters.

Stretched Valuation

In terms of forward non-GAAP P/E, VRNS’ 203.22x is 968.5% higher than the 19.02x industry average. And its 74.46x forward EV/EBITDA is 491.4% higher than the 12.59x industry average. The stock’s 104.83x forward EV/EBIT is 555.8% higher than the 15.98x industry average.

Lower-than-industry Profitability

VRNS’ trailing-12-month net income margin is negative, versus the 5.44% industry average. And its trailing-12-month EBITDA margin is negative compared to the 13.35% industry average. Furthermore, the stock’s 0.39% trailing-12-month asset turnover ratio is 38.4% lower than the 0.64% industry average.

POWR Ratings Reflect Uncertainty

VRNS’ has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. VRNS has a D grade for Stability, which is in sync with its 1.28 beta.

VRNS is ranked #14 out of 30 stocks in the F-rated Software – Security industry.

Click here to access VRNS’ ratings for Growth, Value, Momentum, Sentiment, and Quality.

Click here to check out our Software Industry Report for 2022

Bottom Line

Although VRNS’ EPS and revenue are expected to increase this year, the write-off of its Russia business might impact its revenue and annual recurring revenues. The stock is currently trading below its 50-day and 200-day moving averages of $40.65 and $49.68, respectively, indicating a downtrend. Furthermore, given its lower-than-industry profitability, mixed financials, and stretched valuation, we think it could be wise to wait for a better entry point in the stock.

How Does Varonis Systems, Inc. (VRNS) Stack Up Against its Peers?

While VRNS has an overall POWR Rating of C, one might want to consider investing in the following Software – Security stocks with a B (Buy) rating: Radware Ltd. (RDWR), Trend Micro Incorporated (TMICY), and OneSpan Inc. (OSPN).

Click here to checkout our Cybersecurity Industry Report for 2022


VRNS shares were trading at $34.20 per share on Friday afternoon, down $0.97 (-2.76%). Year-to-date, VRNS has declined -29.89%, versus a -13.06% rise in the benchmark S&P 500 index during the same period.


About the Author: Dipanjan Banchur


Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
VRNSGet RatingGet RatingGet Rating
RDWRGet RatingGet RatingGet Rating
TMICYGet RatingGet RatingGet Rating
OSPNGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

History Lessons Say Stocks About to Head Lower Again

Yes, history has a way of repeating itself. Like how periods of high inflation are followed by recessions and bear markets time and time again. Or how periods of high stock valuations often lead to extended bear markets like 2000 to 2003…and yes that may be repeating now. Before you believe that the next bull market has emerged you may want to read this article to appreciate why the odds point to more downside ahead.

:  |  News, Ratings, and Charts

The 3 Top Aerospace and Defense Stocks to Buy Now

The U.S. aerospace and defense industry is evolving, supported by lucrative fiscal investments and rapid defense technology advancement. Moreover, given the growing tension between China and Taiwan, it could be wise to add quality aerospace and defense stocks, Lockheed Martin (LMT), L3Harris Technologies (LHX), and Raytheon Technologies Corp. (RTX) to your portfolio now. Continue reading…

:  |  News, Ratings, and Charts

After the Bear Market Rally What Comes Next?

The stock market is in the midst of an impressive and blistering rally. From the mid-June lows, the S&P 500 (SPY) is up 14%, while the Nasdaq Composite is closing in on a 20% gain. Some of the factors behind this rally are extreme bearish positioning, better than expected economic data, marginally positive news on inflation, and odds of a 'soft landing' that have increased from implausible to 'pretty unlikely'. In today's commentary, I want to reiterate why I continue to see this as a 'bear market rally' rather than the start of a new bull market. Then, I want to provide some more insight on the thinking behind today's trade alert. We will conclude with an overview of the portfolio. and a couple of quick notes from my recent visit to Iceland. Read on below to find out more…

:  |  News, Ratings, and Charts

2 Momentum Stocks Crushing the Bear Market

Valero Energy (VLO) and Shell (SHEL) have maintained strong momentum amid the highly uncertain market conditions. With recession fears expected to keep the market under pressure in the near term, it could be wise to buy these stocks now to benefit from their momentum, which might continue for some time based on their fundamental strength irrespective of the market conditions. Read on…

:  |  News, Ratings, and Charts

After the Bear Market Rally What Comes Next?

The stock market is in the midst of an impressive and blistering rally. From the mid-June lows, the S&P 500 (SPY) is up 14%, while the Nasdaq Composite is closing in on a 20% gain. Some of the factors behind this rally are extreme bearish positioning, better than expected economic data, marginally positive news on inflation, and odds of a 'soft landing' that have increased from implausible to 'pretty unlikely'. In today's commentary, I want to reiterate why I continue to see this as a 'bear market rally' rather than the start of a new bull market. Then, I want to provide some more insight on the thinking behind today's trade alert. We will conclude with an overview of the portfolio. and a couple of quick notes from my recent visit to Iceland. Read on below to find out more…

Read More Stories

More Varonis Systems, Inc. (VRNS) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All VRNS News