Shares of data protection and security software company Varonis (VRNS, Financial) fell 6.5% in the morning session.
The company announced plans to offer $350 million in Convertible Senior Notes due in 2029 to qualified institutional buyers.
The stock is likely down due to concerns about the dilutive effect of the notes, which can be converted to the company's ordinary stock, raising the total share count.
Varonis Systems Inc (VRNS, Financial) closed at $51.47, with a market capitalization of $5.77 billion. The stock experienced a notable decline due to the announcement regarding convertible senior notes, which have raised concerns of potential dilution.
Looking at the company's financial metrics, Varonis has a Price-to-Book ratio (P/B) of 12.58 and a Price-to-Sales ratio (P/S) of 11.69. However, the PE ratio is currently at 0, reflecting the company's non-profitable status at the moment.
Despite these concerns, Varonis shows strong financial health with an Altman Z-score of 5.71, indicating solid financial stability. Moreover, the company has a strong interest coverage ratio, ensuring it can cover all its debt comfortably.
However, Varonis does have some warning signs. The Beneish M-Score suggests possible financial result manipulation, and its operating margin has been in a 5-year decline, averaging -10.1% annually. Additionally, the company's assets are growing faster than its revenue, indicating potential inefficiencies.
In terms of valuation, Varonis appears "Modestly Overvalued" according to its GF Value of $42.77. This suggests that the stock is trading above its intrinsic value, raising caution for potential investors.
While the company is undergoing significant transitions, especially moving its on-premises customers to its cloud products, investors should consider the potential risks and weigh them against the company's growth prospects. For a deeper dive into Varonis' intrinsic value, visit the GF Value page.
