Investors in Varonis Systems, Inc. (NASDAQ:VRNS) had a good week, as its shares rose 2.3% to close at US$45.19 following the release of its first-quarter results. Revenue hit US$114m in line with forecasts, although the company reported a statutory loss per share of US$0.37 that was somewhat smaller than the analysts expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Taking into account the latest results, the current consensus from Varonis Systems' 20 analysts is for revenues of US$542.4m in 2024. This would reflect a credible 7.2% increase on its revenue over the past 12 months. Losses are expected to increase slightly, to US$1.01 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$542.1m and losses of US$1.05 per share in 2024. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for this year.

There's been no major changes to the consensus price target of US$51.56, suggesting that reduced loss estimates are not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Varonis Systems, with the most bullish analyst valuing it at US$65.00 and the most bearish at US$30.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Varonis Systems' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 9.7% growth on an annualised basis. This is compared to a historical growth rate of 16% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 13% per year. Factoring in the forecast slowdown in growth, it seems obvious that Varonis Systems is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Varonis Systems' revenue is expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Varonis Systems analysts - going out to 2026, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Varonis Systems that we have uncovered.

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