Critical Analysis: Varonis Systems (NASDAQ:VRNS) and Palo Alto Networks (NASDAQ:PANW)

Varonis Systems (NASDAQ:VRNS) and Palo Alto Networks (NASDAQ:PANW) are both computer and technology companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, valuation, profitability, earnings, risk, institutional ownership and analyst recommendations.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Varonis Systems and Palo Alto Networks, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Varonis Systems	0	3	13	0	2.81
Palo Alto Networks	2	12	26	0	2.60

Varonis Systems presently has a consensus price target of $58.50, suggesting a potential upside of 0.15%. Palo Alto Networks has a consensus price target of $217.7868, suggesting a potential upside of 22.98%. Given Palo Alto Networks’ higher possible upside, analysts clearly believe Palo Alto Networks is more favorable than Varonis Systems.

Valuation and Earnings

This table compares Varonis Systems and Palo Alto Networks”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Varonis Systems	$550.95 million	11.88	-$95.76 million	($0.92)	-63.49
Palo Alto Networks	$8.03 billion	14.71	$2.58 billion	$1.75	101.19

Palo Alto Networks has higher revenue and earnings than Varonis Systems. Varonis Systems is trading at a lower price-to-earnings ratio than Palo Alto Networks, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Varonis Systems and Palo Alto Networks’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Varonis Systems	-17.30%	-23.06%	-5.76%
Palo Alto Networks	13.95%	19.48%	5.77%

Volatility & Risk

Varonis Systems has a beta of 0.71, suggesting that its share price is 29% less volatile than the S&P 500. Comparatively, Palo Alto Networks has a beta of 0.94, suggesting that its share price is 6% less volatile than the S&P 500.

Insider and Institutional Ownership

95.7% of Varonis Systems shares are owned by institutional investors. Comparatively, 79.8% of Palo Alto Networks shares are owned by institutional investors. 2.3% of Varonis Systems shares are owned by company insiders. Comparatively, 2.5% of Palo Alto Networks shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

Palo Alto Networks beats Varonis Systems on 12 of the 14 factors compared between the two stocks.

About Varonis Systems

Varonis Systems, Inc. provides software products and services that allow enterprises to manage, analyze, alert, and secure enterprise data in North America, Europe, the Middle East, Africa, and internationally. Its software enables enterprises to protect data stored on premises and in the cloud, including sensitive files and emails; confidential personal data belonging to customers, and patients and employees' data; financial records; source code, strategic and product plans; and other intellectual property. It offers DatAdvantage that captures, aggregates, normalizes, and analyzes every data access event for users on Windows and UNIX/Linux servers, storage devices, email systems, intranet servers, cloud applications, and data stores; and DatAlert that profiles users, devices, and their behaviors related to systems and data, detects and alerts on deviations that indicate compromise, and provides a web-based dashboard and investigative interface. It also provides data Classification engine that identifies and tags data based on criteria set in various metadata dimensions, as well as provides business and information technology (IT) personnel with actionable intelligence about data; and DataPrivilege. In addition, the company offers Data Transport Engine, an execution engine that unifies the manipulation of data and metadata, translating business decisions, and instructions into technical commands, such as data migration or archiving; and DatAnswers that provides search functionality for enterprise data. It serves its products to financial services, public, healthcare, industrial, technology, insurance, energy and utilities, consumer and retail, education and construction, and engineering sectors. The company sells its products through a network of distributors and resellers. Varonis Systems, Inc. was incorporated in 2004 and is headquartered in New York, New York.

About Palo Alto Networks

Palo Alto Networks, Inc. provides cybersecurity solutions worldwide. The company offers firewall appliances and software; and Panorama, a security management solution for the global control of network security platform as a virtual or a physical appliance. It also provides subscription services covering the areas of threat prevention, malware and persistent threat, URL filtering, laptop and mobile device protection, DNS security, Internet of Things security, SaaS security API, and SaaS security inline, as well as threat intelligence, and data loss prevention. In addition, the company offers cloud security, secure access, security operations, and threat intelligence and security consulting; professional services, including architecture design and planning, implementation, configuration, and firewall migration; education services, such as certifications, as well as online and in-classroom training; and support services. It sells its products and services through its channel partners, as well as directly to medium to large enterprises, service providers, and government entities operating in various industries, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications. Palo Alto Networks, Inc. was incorporated in 2005 and is headquartered in Santa Clara, California.