Intrinsic value of Varonis Systems, Inc. - VRNS

Previous Close

$61.23

  Intrinsic Value

$1.06

stock screener

  Rating & Target

str. sell

-98%

Previous close

$61.23

 
Intrinsic value

$1.06

 
Up/down potential

-98%

 
Rating

str. sell

We calculate the intrinsic value of VRNS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  19.90
  18.41
  17.07
  15.86
  14.78
  13.80
  12.92
  12.13
  11.41
  10.77
  10.20
  9.68
  9.21
  8.79
  8.41
  8.07
  7.76
  7.48
  7.24
  7.01
  6.81
  6.63
  6.47
  6.32
  6.19
  6.07
  5.96
  5.87
  5.78
  5.70
Revenue, $m
  324
  383
  449
  520
  597
  679
  767
  860
  958
  1,061
  1,169
  1,283
  1,401
  1,524
  1,652
  1,785
  1,924
  2,068
  2,217
  2,373
  2,534
  2,702
  2,877
  3,059
  3,248
  3,445
  3,651
  3,865
  4,088
  4,322
Variable operating expenses, $m
  344
  407
  477
  553
  634
  722
  815
  914
  1,018
  1,128
  1,243
  1,363
  1,489
  1,620
  1,756
  1,898
  2,045
  2,198
  2,357
  2,522
  2,694
  2,873
  3,058
  3,252
  3,453
  3,662
  3,881
  4,109
  4,346
  4,594
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  344
  407
  477
  553
  634
  722
  815
  914
  1,018
  1,128
  1,243
  1,363
  1,489
  1,620
  1,756
  1,898
  2,045
  2,198
  2,357
  2,522
  2,694
  2,873
  3,058
  3,252
  3,453
  3,662
  3,881
  4,109
  4,346
  4,594
Operating income, $m
  -20
  -24
  -28
  -33
  -38
  -43
  -48
  -54
  -60
  -67
  -74
  -81
  -88
  -96
  -104
  -112
  -121
  -130
  -140
  -149
  -160
  -170
  -181
  -193
  -205
  -217
  -230
  -243
  -258
  -272
EBITDA, $m
  -17
  -20
  -23
  -27
  -31
  -35
  -40
  -45
  -50
  -55
  -61
  -67
  -73
  -80
  -86
  -93
  -100
  -108
  -116
  -124
  -132
  -141
  -150
  -160
  -170
  -180
  -191
  -202
  -213
  -226
Interest expense (income), $m
  0
  0
  2
  4
  6
  8
  10
  13
  16
  19
  22
  25
  29
  32
  36
  40
  44
  48
  53
  57
  62
  67
  72
  78
  83
  89
  95
  101
  108
  115
  122
Earnings before tax, $m
  -20
  -26
  -32
  -38
  -46
  -53
  -61
  -70
  -79
  -89
  -99
  -110
  -121
  -132
  -144
  -157
  -170
  -183
  -197
  -212
  -227
  -243
  -259
  -276
  -294
  -312
  -331
  -351
  -372
  -394
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -20
  -26
  -32
  -38
  -46
  -53
  -61
  -70
  -79
  -89
  -99
  -110
  -121
  -132
  -144
  -157
  -170
  -183
  -197
  -212
  -227
  -243
  -259
  -276
  -294
  -312
  -331
  -351
  -372
  -394

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  327
  387
  453
  525
  602
  685
  774
  868
  967
  1,071
  1,180
  1,294
  1,413
  1,538
  1,667
  1,801
  1,941
  2,086
  2,237
  2,394
  2,557
  2,727
  2,903
  3,087
  3,278
  3,477
  3,684
  3,900
  4,126
  4,361
Adjusted assets (=assets-cash), $m
  327
  387
  453
  525
  602
  685
  774
  868
  967
  1,071
  1,180
  1,294
  1,413
  1,538
  1,667
  1,801
  1,941
  2,086
  2,237
  2,394
  2,557
  2,727
  2,903
  3,087
  3,278
  3,477
  3,684
  3,900
  4,126
  4,361
Revenue / Adjusted assets
  0.991
  0.990
  0.991
  0.990
  0.992
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.992
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
Average production assets, $m
  17
  21
  24
  28
  32
  37
  41
  46
  52
  57
  63
  69
  76
  82
  89
  96
  104
  112
  120
  128
  137
  146
  155
  165
  175
  186
  197
  209
  221
  233
Working capital, $m
  -55
  -66
  -77
  -89
  -102
  -116
  -131
  -147
  -164
  -181
  -200
  -219
  -240
  -261
  -282
  -305
  -329
  -354
  -379
  -406
  -433
  -462
  -492
  -523
  -555
  -589
  -624
  -661
  -699
  -739
Total debt, $m
  32
  67
  106
  148
  193
  242
  294
  349
  407
  468
  532
  599
  669
  741
  817
  896
  978
  1,063
  1,151
  1,243
  1,339
  1,438
  1,542
  1,649
  1,761
  1,878
  1,999
  2,126
  2,258
  2,396
Total liabilities, $m
  191
  227
  265
  307
  353
  402
  453
  508
  566
  627
  691
  758
  828
  901
  977
  1,056
  1,137
  1,223
  1,311
  1,403
  1,499
  1,598
  1,701
  1,809
  1,921
  2,037
  2,159
  2,285
  2,418
  2,555
Total equity, $m
  135
  160
  187
  217
  249
  284
  320
  359
  400
  443
  489
  536
  585
  637
  690
  746
  804
  864
  926
  991
  1,059
  1,129
  1,202
  1,278
  1,357
  1,439
  1,525
  1,615
  1,708
  1,805
Total liabilities and equity, $m
  326
  387
  452
  524
  602
  686
  773
  867
  966
  1,070
  1,180
  1,294
  1,413
  1,538
  1,667
  1,802
  1,941
  2,087
  2,237
  2,394
  2,558
  2,727
  2,903
  3,087
  3,278
  3,476
  3,684
  3,900
  4,126
  4,360
Debt-to-equity ratio
  0.240
  0.420
  0.560
  0.680
  0.780
  0.850
  0.920
  0.970
  1.020
  1.060
  1.090
  1.120
  1.140
  1.160
  1.180
  1.200
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.280
  1.290
  1.300
  1.300
  1.310
  1.320
  1.320
  1.330
Adjusted equity ratio
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -20
  -26
  -32
  -38
  -46
  -53
  -61
  -70
  -79
  -89
  -99
  -110
  -121
  -132
  -144
  -157
  -170
  -183
  -197
  -212
  -227
  -243
  -259
  -276
  -294
  -312
  -331
  -351
  -372
  -394
Depreciation, amort., depletion, $m
  3
  4
  5
  6
  6
  7
  8
  9
  10
  11
  13
  14
  15
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
Funds from operations, $m
  -17
  -22
  -27
  -33
  -39
  -46
  -53
  -61
  -69
  -77
  -86
  -96
  -105
  -116
  -126
  -137
  -149
  -161
  -173
  -186
  -199
  -213
  -228
  -243
  -259
  -275
  -292
  -310
  -328
  -348
Change in working capital, $m
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
Cash from operations, $m
  -8
  -12
  -16
  -21
  -26
  -32
  -38
  -45
  -52
  -60
  -68
  -76
  -85
  -95
  -104
  -115
  -125
  -136
  -148
  -159
  -172
  -185
  -198
  -212
  -226
  -241
  -257
  -273
  -290
  -308
Maintenance CAPEX, $m
  -3
  -3
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
New CAPEX, $m
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Cash from investing activities, $m
  -6
  -6
  -8
  -9
  -10
  -10
  -12
  -13
  -14
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -26
  -29
  -30
  -32
  -35
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -54
  -57
Free cash flow, $m
  -14
  -18
  -24
  -29
  -36
  -43
  -50
  -58
  -67
  -76
  -85
  -95
  -105
  -116
  -128
  -140
  -152
  -165
  -178
  -192
  -206
  -221
  -237
  -253
  -270
  -287
  -305
  -324
  -344
  -364
Issuance/(repayment) of debt, $m
  32
  35
  39
  42
  45
  49
  52
  55
  58
  61
  64
  67
  70
  73
  76
  79
  82
  85
  88
  92
  96
  99
  103
  108
  112
  117
  121
  127
  132
  138
Issuance/(repurchase) of shares, $m
  43
  51
  59
  68
  78
  88
  98
  109
  120
  132
  144
  157
  170
  184
  198
  212
  227
  243
  260
  277
  294
  313
  332
  352
  373
  395
  417
  441
  466
  492
Cash from financing (excl. dividends), $m  
  75
  86
  98
  110
  123
  137
  150
  164
  178
  193
  208
  224
  240
  257
  274
  291
  309
  328
  348
  369
  390
  412
  435
  460
  485
  512
  538
  568
  598
  630
Total cash flow (excl. dividends), $m
  61
  68
  74
  81
  87
  94
  100
  106
  112
  117
  123
  129
  134
  140
  146
  152
  158
  164
  170
  177
  184
  191
  199
  207
  215
  224
  234
  243
  254
  265
Retained Cash Flow (-), $m
  -43
  -51
  -59
  -68
  -78
  -88
  -98
  -109
  -120
  -132
  -144
  -157
  -170
  -184
  -198
  -212
  -227
  -243
  -260
  -277
  -294
  -313
  -332
  -352
  -373
  -395
  -417
  -441
  -466
  -492
Prev. year cash balance distribution, $m
  13
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  31
  17
  15
  13
  10
  6
  2
  -3
  -9
  -15
  -21
  -28
  -36
  -44
  -52
  -61
  -70
  -80
  -89
  -100
  -111
  -122
  -133
  -145
  -158
  -170
  -184
  -197
  -212
  -227
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  30
  16
  13
  10
  7
  4
  1
  -2
  -5
  -8
  -10
  -12
  -14
  -15
  -15
  -15
  -15
  -15
  -14
  -13
  -11
  -10
  -9
  -7
  -6
  -5
  -4
  -3
  -2
  -2
Current shareholders' claim on cash, %
  96.3
  92.9
  89.5
  86.4
  83.4
  80.6
  77.9
  75.3
  72.9
  70.6
  68.3
  66.2
  64.2
  62.2
  60.4
  58.6
  56.8
  55.2
  53.5
  52.0
  50.5
  49.0
  47.6
  46.3
  45.0
  43.7
  42.5
  41.3
  40.1
  39.0

Varonis Systems, Inc. provides a solutions that protect data from insider threats and cyberattacks. The Company's products include DatAdvantage, DataPrivilege, Interface Data Unit Classification Framework, Data Transport Engine, DatAnywhere and DatAnswers. Its platform allows enterprises to analyze, secure, manage and migrate volumes of unstructured data. It specializes in file and e-mail systems that store valuable spreadsheets, word processing documents, presentations, audio and video files, e-mails and text. Its Metadata Framework is a technology platform that extracts metadata from an enterprise's information technology (IT) infrastructure. Data often includes an enterprise's financial information, intellectual property, and confidential employee, customer or patient records. IT and business personnel deploy its software for a range of use cases, including data security, governance and compliance, user behavior analytics, archiving, search, and file synchronization and sharing.

FINANCIAL RATIOS  of  Varonis Systems, Inc. (VRNS)

Valuation Ratios
P/E Ratio -91.2
Price to Sales 10
Price to Book 19.8
Price to Tangible Book
Price to Cash Flow 234.6
Price to Free Cash Flow 547.4
Growth Rates
Sales Growth Rate 29.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -10.4%
Ret/ On Assets - 3 Yr. Avg. -14%
Return On Total Capital -21.6%
Ret/ On T. Cap. - 3 Yr. Avg. -28.2%
Return On Equity -21.6%
Return On Equity - 3 Yr. Avg. -28.2%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 90.9%
Gross Margin - 3 Yr. Avg. 90.5%
EBITDA Margin -9.1%
EBITDA Margin - 3 Yr. Avg. -14%
Operating Margin -9.8%
Oper. Margin - 3 Yr. Avg. -14.2%
Pre-Tax Margin -10.4%
Pre-Tax Margin - 3 Yr. Avg. -15.2%
Net Profit Margin -11%
Net Profit Margin - 3 Yr. Avg. -15.4%
Effective Tax Rate -5.9%
Eff/ Tax Rate - 3 Yr. Avg. -2%
Payout Ratio 0%

VRNS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VRNS stock intrinsic value calculation we used $270 million for the last fiscal year's total revenue generated by Varonis Systems, Inc.. The default revenue input number comes from 0001 income statement of Varonis Systems, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our VRNS stock valuation model: a) initial revenue growth rate of 19.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for VRNS is calculated based on our internal credit rating of Varonis Systems, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Varonis Systems, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of VRNS stock the variable cost ratio is equal to 106.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for VRNS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Varonis Systems, Inc..

Corporate tax rate of 27% is the nominal tax rate for Varonis Systems, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the VRNS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for VRNS are equal to 5.4%.

Life of production assets of 3.5 years is the average useful life of capital assets used in Varonis Systems, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for VRNS is equal to -17.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $125.37 million for Varonis Systems, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 29.605 million for Varonis Systems, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Varonis Systems, Inc. at the current share price and the inputted number of shares is $1.8 billion.

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