VARONIS SYSTEMS INC (VRNS) DCF Valuation & Fundamental Primer
VARONIS SYSTEMS INC (VRNS) currently trades at $32.80 with an enterprise value of $2.69B. Our proprietary institutional model rates VARONIS SYSTEMS INC at 70/100 (Grade: B+ · Quality Software Operator). The current market price prices in an implied 5-year revenue CAGR of 28.2% vs. historical growth of 17.1% (Aggressive Growth Expectations Priced In).
Institutional fundamental teardown of Varonis Systems (VRNS) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
VARONIS SYSTEMS INC (VRNS) 3-Scenario DCF Valuation Range
Institutional Software Quality Scorecard (70/100 · Grade B+)
Solid software model with clear operating leverage, partially offset by standard SBC or moderate burn.
Positive FCF but lower conversion efficiency due to capex or timing
Minimal dilution friction; management compensation aligned with shareholders
High-quality software margins with healthy balanced growth and profitability
Moderate leverage or cash burn; monitor liquidity runway
Core Investment Strengths & Moats
- Low dilution friction: SBC is only 0.0% of revenue
- Healthy unit economics: 83.0% gross margin
Key Operational & Dilution Risks
Reverse-DCF Solver: What Growth is Priced Into VRNS?
The current share price demands 28.2% 5-year CAGR—a +11.1% acceleration over historical run-rate (17.1%). Any growth slowdown risks valuation multiple contraction.
VARONIS SYSTEMS INC (VRNS) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $551.0M | $551.0M | $645.3M | $755.9M | $885.4M | $1.04B | $1.21B |
| Gross Profit | $457.1M | $457.1M | $535.4M | $627.1M | $734.6M | $860.4M | $1.01B |
| Operating Income (EBIT) | $-106.8M | $-106.8M | $-125.1M | $-146.6M | $-171.7M | $-201.1M | $-235.5M |
| Stock-Based Compensation (SBC) | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Unlevered Free Cash Flow (FCF) | $108.5M | $108.5M | $127.1M | $148.8M | $174.3M | $204.2M | $239.2M |
| SBC-Adjusted True Cash Flow | $108.5M | $108.5M | $127.1M | $148.8M | $174.3M | $204.2M | $239.2M |
Cybersecurity & Identity Peer Comparables Matrix
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| VARONIS SYSTEMS INC | VRNS | $3.71B | $551.0M | 83.0% | 19.7% | 36.8% | — | 7.4× |
| CrowdStrike Holdings | CRWD | $86.18B | $3.95B | 78.0% | 31.2% | 62.2% | 19.5% | 20.9× |
| Palo Alto Networks | PANW | $126.34B | $8.03B | 74.4% | 37.8% | 56.3% | 14.2% | 15.0× |
| Fortinet, Inc. | FTNT | $10.37B | $1.11B | 72.2% | 11.2% | 32.7% | 9.6% | 9.1× |
| Zscaler, Inc. | ZS | $32.45B | $2.76B | 74.5% | 21.4% | 47.4% | 12.7% | 11.4× |
| QLYS | QLYS | $34.99B | $2.79B | 80.6% | 14.5% | 31.1% | 16.3% | 12.0× |
| SentinelOne, Inc. | S | $51.61B | $4.26B | 82.7% | 24.6% | 50.9% | 13.7% | 11.5× |
| Peer Cohort Median Benchmark (N=6) | 76.3% | 23.0% | 49.1% | 13.9% | 11.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 7.4× | $4.07B | $3.71B | $32.80 | 0.0% |
| -20% Multiple Compression | 5.9× | $3.26B | $2.89B | $25.60 | -20.0% |
| -35% Multiple Compression | 4.8× | $2.65B | $2.28B | $20.20 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $2.75B | $2.39B | $21.15 | -32.4% |
Frequently Asked Questions: VARONIS SYSTEMS INC (VRNS) Valuation
What is VARONIS SYSTEMS INC (VRNS)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, VARONIS SYSTEMS INC (VRNS) has a Base Case implied value of $20.55 per share (with a Bear Case of $7.63 and a Bull Case of $37.83), compared to its current price of $32.80. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is VARONIS SYSTEMS INC (VRNS)'s Rule of 40 score and Free Cash Flow margin?
VARONIS SYSTEMS INC achieves a Rule of 40 score of 36.8%, combining a 17.1% revenue growth run-rate with a 19.7% TTM free cash flow margin on $551.0M in trailing twelve-month revenue. In the Cybersecurity & Identity peer cohort, the median Rule of 40 benchmark is 49.1%.
What revenue growth rate is priced into VRNS stock according to Reverse-DCF analysis?
At $32.80 per share (Enterprise Value of $4.07B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 28.2%, compared to VARONIS SYSTEMS INC's historical CAGR of 17.1%. Overall market expectations are rated as "Aggressive Growth Expectations Priced In".
How does VARONIS SYSTEMS INC compare to Cybersecurity & Identity software peers?
VARONIS SYSTEMS INC (VRNS) earns an institutional Software Quality Score of 70/100 (Grade B+ — Quality Software Operator). Across its Cybersecurity & Identity peer group (CRWD, PANW, FTNT, ZS, QLYS), the cohort trades at a median EV/TTM Revenue multiple of 11.8× and a median gross margin of 76.3%.
How does Stock-Based Compensation (SBC) impact VARONIS SYSTEMS INC (VRNS)'s valuation?
VARONIS SYSTEMS INC recorded $0 in TTM stock-based compensation (15.0% of revenue). When treating SBC as a cash-equivalent compensation expense, VARONIS SYSTEMS INC's SBC-adjusted free cash flow yield is 2.9%, scoring 25/25 on our Shareholder Dilution Friction pillar.