Varonis: Targeting Cyber Attacks

12/09/2014 7:00 am EST


Rob DeFrancesco

Founder, Tech-Stock Prospector

The latest wave of cyber attacks appears relentless; organizations worldwide are increasingly realizing that their IT security budgets need to be bumped up, observes Rob DeFrancesco, editor of Smart Tech Investor.

An emerging vendor, Varonis Systems (VRNS), secures unstructured data; this is data that doesn't neatly fit into rows and columns in a traditional database) within an organization.

Varonis is well positioned to benefit from a major secular tailwind: 90% of data created in the next decade will be of the unstructured variety, according to research firm IDC.

Varonis has seen strong revenue growth rate (estimated at 35% for 2014) and a rapidly expanding customer base (223 accounts were added in Q3, up from 206 additions in Q2 and 158 in Q1).

There are an estimated 120,000 enterprises with more than 1,000 employees each that could benefit from using one or more Varonis offerings; the company currently has around 3,000 customers.

It's a simple fact that people having too much access to certain types of critical information are often behind data breaches within an enterprise.

Varonis solutions-after determining who can access various types of files, images, emails, and records-enable organizations to see where data is being accessed at all times.

Started in 2005, Varonis has seen its solutions used in a wide range of industries-including financial services, consumer packaged goods, retail, technology, media and entertainment, energy, healthcare, and public sector.

For 2014, Varonis looks for revenue to come in at $100.8 million to $101.5 million, representing growth of 35% to 36% year over year.

For 2015, the consensus revenue estimate of $129.2 million indicates growth of 28% (the Street-high estimate of $130.6 million calls for growth of 29%).

Varonis has a solid balance sheet: cash and investments total $115.3 million (with no debt), representing 21.7% of the recent market cap of $530.6 million.

Given the company's solid top-line growth rate, Varonis shares, recently trading at 4.1 times the 2015 consensus revenue estimate, have the ability to trade at an expanded price-to-sales multiple of at least 6 times, putting the fair-value price target at $31.65.

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