VARONIS SYSTEMS INC

Where It Passes

Where It Falls Short

• Valuation0% pass✓ 2✗ 26▾

  No clean pass — all 13 investors flag at least one valuation criterion

  Price / 3-yr avg EPS

  ✗Graham<= 15x

  Price-to-Book Ratio9.6x

  ✗Graham<= 1.5x

  P/E x P/B

  ✗Graham<= 22.5

  Basic earnings-growth PEG (dividends excluded)

  ✗Lynch< 1.0 (ideally < 0.5)

  EBIT / Enterprise Value-2.5%

  ✗Greenblatt> 10%

  Earnings Yield + ROC AssessmentEY=-2.5%, ROC=-31.0%

  ✗GreenblattBoth EY > 10% and ROC > 25%

  Price / EPS

  ✗Dreman< 12x✗Templeton< 12x (fixed ceiling; proxy for the market's cheapest 40%)

  Price / (CFO / Shares)39.0x

  ✗Dreman< 8x

  Price / Book Value per Share9.6x

  ✗Dreman< 1.2x✗Templeton< 1.5x✗SchlossP/B <= 0.80x (app cutoff)

  Valuation ReasonablenessOE Yield=-2.3%

  ✗MungerP/E < 25 or Owner Earnings Yield > 5%

  P/E or FCF YieldFCF Yield=2.4%

  ✗PabraiP/E < 15 or FCF Yield > 10%

  P/B or P/E vs. Historical AverageP/B=9.6x

  ✗MarksP/E < 15 or P/B < 2.0

  Discount to Intrinsic ValueN/A (negative normalized EPS)

  ✗Marks>= 20% below intrinsic value

  Price / FCF per Share42.6x

  ✗Ackman<= 25

  Price vs. Trailing Low228% of trailing low ($21.47)

  ✗Templeton<= 120% of trailing low (certified split-adjusted live window)

  Net income / market capitalization-2.71%; #3652/6340 (top 57.6%)

  ✗AsnessTop 30% of eligible cross-section✗OshaughnessyTop 10% of eligible cross-section

  Positive book equity / market capitalization+0.0769; #4873/6449 (top 75.6%)

  ✗AsnessTop 30% of eligible cross-section

  Price / Diluted EPS

  ✗NeffP/E <= 15x (app proxy for a P/E 40%-60% below the market)

  (EPS CAGR % + Dividend Yield %) / P/E

  ✗Neff> 0.7 (Neff's published traditional edge)

  Price / Tangible Book Value per Share12.87x

  ✗SchlossP/TBV <= 1.00x (app cutoff)

  Book Value per Share Change+411.2%

  ✓SchlossLatest BVPS >= earliest BVPS over >= 3 years (app rule)

  Revenue / market capitalization+0.1269; #4186/5247 (top 79.8%)

  ✗OshaughnessyTop 10% of eligible cross-section

  (Operating cash flow - capex) / market capitalization+2.09%; #2243/4519 (top 49.6%)

  ✗OshaughnessyTop 10% of eligible cross-section

  Trailing six-month price return through the evaluation date+86.08%; #393/6202 (top 6.3%)

  ✓OshaughnessyTop 10% of eligible cross-section
• Valuation models0% pass✗ 2▾

  VRNS overvalued: all 2 models price fair value below $48.94 (median $25.04)

  Munger fair value$20.91

  ✗Munger-134.1% margin vs $48.94

  Ackman fair value$29.17

  ✗Ackman-67.8% margin vs $48.94
• Profitability6% pass✓ 3✗ 32▾

  15 of 16 flag VRNS's profitability — Graham, Buffett, Lynch +12 more

  Positive EPS (10 years)0/15 years positive

  ✗GrahamPositive EPS every year for 10 years

  EPS Growth (3-yr avg, 10-yr window)

  ✗Graham>= 33% growth

  Net Income Positive (10+ years)0/15 years positive

  ✗BuffettPositive every year for 10+ years

  ROE (up to 5-year arithmetic mean)-21.5%

  ✗Buffett> 15% arithmetic mean (app rule)

  Operating Margin (10-yr trend)-23.5% (latest)

  ✗BuffettStable or rising over 10 years

  Free Cash Flow Proxy$-129.3M

  ✗BuffettPositive and growing

  Earnings Variance (10-yr CoV)

  ✗BuffettCoV < 0.3

  Retained Earnings Effectiveness

  ✗Buffett$1 retained -> > $1 market value created

  Basic earnings-growth PEG (dividends excluded)

  ✗Lynch< 1.0 (ideally < 0.5)

  3-5 Year EPS CAGR

  ✗Lynch15-30% (Fast Grower); > 0% to pass

  ROE-35.3%

  ✗Lynch> 15%

  EBIT / Enterprise Value-2.5%

  ✗Greenblatt> 10%

  Earnings Yield + ROC AssessmentEY=-2.5%, ROC=-31.0%

  ✗GreenblattBoth EY > 10% and ROC > 25%

  Net Income / Total Assets-7.22%

  ✗PiotroskiROA > 0

  ROA Change YoY-5.75% -> -7.22% (delta: -1.46%)

  ✗PiotroskiCurrent ROA > Prior ROA

  (CFO / Total Assets) vs ROACFO/Assets=8.23%, ROA=-7.22%

  ✓PiotroskiCFO/Assets > ROA

  Gross Margin Change YoY83.0% -> 78.8%

  ✗PiotroskiImproved YoY

  Pre-Tax Income / Revenue-20.2%

  ✗Dreman>= 8%

  Net Income / Shareholders' Equity-35.3%

  ✗Dreman> 12%

  Margin of SafetyP/B=9.6x

  ✗PabraiP/B < 1.5 or P/E < 15

  Return on Equity-21.1% (3-yr avg)

  ✗AkreROE > 20% (3-year avg)

  Discount to Intrinsic ValueN/A (negative normalized EPS)

  ✗Marks>= 20% below intrinsic value

  Positive Net Income Frequency0/14 years positive

  ✗MarksPositive net income in >= 7 of last 10 years

  Operating Income / Revenue-22.8%

  ✗Ackman>= 15%

  Net Income / Shareholders Equity-35.3%

  ✗Ackman>= 15%

  5-Year EPS CAGR

  ✗Templeton> 0% (5-year EPS CAGR)

  Operating Margin Trend-23.5% (2023) -> -23.5% (2025)

  ✗TempletonNon-negative operating-margin trend over 3 years

  Revenue growth vs. gross and operating margin trendgross margin 85.6% -> 78.8%, operating margin -23.5% -> -23.5%

  ✓SleepRevenue rising; gross margin flat or falling; operating margin holding

  Net income / market capitalization-2.71%; #3652/6340 (top 57.6%)

  ✗AsnessTop 30% of eligible cross-section✗OshaughnessyTop 10% of eligible cross-section

  Gross profit / total assets+32.78%; #1281/3702 (top 34.6%)

  ✗AsnessTop 30% of eligible cross-section

  Net income / positive book equity-35.28%; #3999/5226 (top 76.5%)

  ✗AsnessTop 30% of eligible cross-section

  Negative 5-year standard deviation of ROA-0.0222; #1563/5884 (top 26.6%)

  ✓AsnessTop 30% of eligible cross-section

  3-5 Year Diluted EPS CAGR

  ✗Neff7%-20% annualized

  Positive Diluted-EPS Years0/10 years positive

  ✗Schloss>= 70% positive over 5-10 observed years (app rule)
• Verdicts7% pass✓ 1✗ 14▾

  Split decision: 13 FAIL · 2 NEUTRAL · 1 PASS

  Overall verdict

  ✗GrahamFAIL (1/9)✗BuffettFAIL (0/9)✗LynchFAIL (1/7)✗GreenblattRank #2103✓PiotroskiPASS (F-Score 5)✗DremanFAIL (1/11)✗MungerFAIL (0/4)✗PabraiFAIL (0/3)✗AkreFAIL (1/6)✗MarksFAIL (1/5)✗AckmanFAIL (3/9)✗TempletonFAIL (1/8)•SleepNEUTRAL (4/6)✗AsnessFAIL (Rank #1556/2370 (Top 65.7%))✗NeffFAIL (2/6)✗SchlossFAIL (1/7)•OshaughnessyNEUTRAL (Not ranked)
• Debt & Leverage8% pass✓ 1✗ 14▾

  11 of 12 flag VRNS's debt & leverage — Graham, Buffett, Lynch +8 more

  LT Debt vs Net Current Assets

  ✗GrahamLT Debt <= Net Current Assets

  Debt/Equity & Interest CoverageD/E: 0.76, IC: -19.0x

  ✗BuffettD/E < 0.5 AND Interest Coverage > 5x

  Total Debt / Equity1.05

  ✗Lynch< 0.33

  Cash - Long-term Debt

  ✗LynchPositive preferred

  LT Debt / Total Assets Change0.00% -> 0.00%

  ✓PiotroskiDecreased YoY

  Current Assets / Current Liabilities1.47

  ✗Dreman> 1.5✗SchlossCurrent ratio >= 1.50x (app cutoff)

  Total Debt / Shareholders' Equity1.05

  ✗Dreman< 0.8✗Templeton< 1.0 (fixed cap; proxy for below-sector-median leverage)✗SchlossD/E < 1.00x

  Debt Levels1.05

  ✗MungerDebt/Equity < 0.5✗AkreDebt/Equity < 0.3

  Interest Coverage & Debt/EBITDAIC=-19.0x, D/EBITDA=N/A

  ✗MarksInterest Coverage > 3x; Debt/EBITDA < 4x

  Total Debt / Shareholders Equity1.05

  ✗Ackman<= 1.0

  Negative debt-to-equity (higher means less debt)-1.0458; #3268/4210 (top 77.6%)

  ✗AsnessTop 30% of eligible cross-section
• Growth13% pass✓ 4✗ 9▾

  7 of 8 flag VRNS's growth — Graham, Lynch, Dreman +4 more

  EPS Growth (3-yr avg, 10-yr window)

  ✗Graham>= 33% growth

  Basic earnings-growth PEG (dividends excluded)

  ✗Lynch< 1.0 (ideally < 0.5)

  3-5 Year EPS CAGR

  ✗Lynch15-30% (Fast Grower); > 0% to pass

  Inventory Growth vs Revenue GrowthN/A (no inventory)

  ✓LynchInventory growth < Revenue growth

  EPS Growth Direction

  ✗DremanPositive over recent years

  EPS CAGR

  ✗Dreman> 5% annualized

  Positive Net Income Frequency0/14 years positive

  ✗MarksPositive net income in >= 7 of last 10 years

  3yr Median Revenue Growth10.4%

  ✓Ackman>= 5%

  Positive EPS Growth Frequency2/5 years with positive EPS growth

  ✗AckmanPositive EPS growth in >= 3 of last 5 years

  5-Year EPS CAGR

  ✗Templeton> 0% (5-year EPS CAGR)

  Revenue growth vs. gross and operating margin trendgross margin 85.6% -> 78.8%, operating margin -23.5% -> -23.5%

  ✓SleepRevenue rising; gross margin flat or falling; operating margin holding

  5-year Revenue CAGR16.3%

  ✓SleepCAGR > 7%

  3-5 Year Diluted EPS CAGR

  ✗Neff7%-20% annualized
• Efficiency13% pass✓ 2✗ 9▾

  7 of 8 flag VRNS's efficiency — Graham, Buffett, Greenblatt +4 more

  Current Ratio1.47

  ✗Graham>= 2.0

  ROIC (3-5 yr avg)-109.8%

  ✗Buffett> 10%

  ROIC - WACC-119.8%

  ✗BuffettPositive (WACC = 10%)

  EBIT / (NWC + Net Fixed Assets)-31.0%

  ✗Greenblatt> 25%

  Current Ratio Change YoY1.24 -> 1.97

  ✓PiotroskiIncreased YoY

  Revenue / Total Assets Change YoY0.33x -> 0.35x

  ✓PiotroskiImproved YoY

  Current Assets / Current Liabilities1.47

  ✗Dreman> 1.5

  Return on Invested Capital-14.5%

  ✗Munger> 15%

  ROIC (high and growing)FY2023: ROIC=-12.5%; FY2024: ROIC=-8.0%; FY2025: ROIC=-11.0%

  ✗AkreLatest 3 consecutive FYs: ROIC > 15% in each

  Reinvestment Rate x ROICN/A (non-positive net income)

  ✗AkreReinvestment Rate * ROIC > 10%

  ROIC (5-year)0/5 years above 12% (latest -11.0%)

  ✗SleepROIC > 12% in a majority of years
• Cash Flow40% pass✓ 5✗ 7▾

  6 of 10 flag VRNS's cash flow — Buffett, Lynch, Dreman +3 more

  Free Cash Flow Proxy$-129.3M

  ✗BuffettPositive and growing

  FCF Positive and Growing$118.1M

  ✗LynchPositive and growing

  Operating Cash Flow$147.4M

  ✓PiotroskiCFO > 0

  (CFO / Total Assets) vs ROACFO/Assets=8.23%, ROA=-7.22%

  ✓PiotroskiCFO/Assets > ROA

  Price / (CFO / Shares)39.0x

  ✗Dreman< 8x

  P/E or FCF YieldFCF Yield=2.4%

  ✗PabraiP/E < 15 or FCF Yield > 10%

  FCF Positive8/14 years FCF positive

  ✓MarksPositive FCF in majority of recent years

  (OCF - CapEx) / Market Cap2.1%

  ✗Ackman>= 4%

  Price / FCF per Share42.6x

  ✗Ackman<= 25

  Positive Operating Cash Flow frequency10/14 years positive

  ✓SleepPositive OCF in >= 70% of available years

  Operating Cash Flow - Capital Expenditures$118.1M

  ✓Neff> $0 (app proxy for a strong fundamental case)

  (Operating cash flow - capex) / market capitalization+2.09%; #2243/4519 (top 49.6%)

  ✗OshaughnessyTop 10% of eligible cross-section