Varonis Systems: Best Small-Cap Idea For 2017

Varonis Systems Inc VRNS has recorded license revenue growth of more than 30 percent over the last four quarters. The company should be able to “easily extend its current six straight quarter of solid, consistent quarterly execution in 2017, which should lead to shares commanding premium valuation multiples,” Brean Capital’s Yun Kim said in a report.

Kim reiterated a Buy rating and a price target of $40 for Varonis Systems, terming it has the “top small cap idea entering 2017.”

Growth Potential

Varonis Systems has been delivering robust growth, backed by “strong secular trend around insider threat prevention (ITP).” There is “high visibility and velocity” in the company’s current sales process, with buyers becoming “more educated regarding the technology,” Kim elaborated.

The backdrop should provide a “strong growth catalyst over the next several years,” since buyers already have approved budget for ITP security projects and Varonis Systems is establishing itself as “the clear market leader in this emerging market,” the analyst commented.

Along with high volume, Varonis Systems also has a “low ASP [average selling price] driven land-and-expand business model,” which should allow the company to generate strong results in 2017, Kim mentioned. She added that the shares were currently trading at a “sizable discount to its peers with similar growth profile,” and offered “a compelling window of opportunity to be ahead of the next execution story in the security software space.”