Tenable (NASDAQ: TENB) is a cybersecurity company that gets less attention than Palo Alto Networks, Fortinet, and CrowdStrike. Tenable's stock has doubled since its July 2018 IPO at $23.
Could this cybersecurity niche player grow and transform a $10,000 investment into $1 million in a decade? Find out by reviewing its business model, growth rates, and valuation.
Large cybersecurity organizations like Palo Alto, Fortinet, and CrowdStrike protect companies from external threats. Tenable scans an organization's infrastructure for misconfigured software, weak passwords, and network issues to avoid cyberattacks. Enterprise and government customers use Nessus Professional. A free version is available for home users.
Tenable serves nearly 40,000 customers, including 60% of the Fortune 500 and 40% of the Global 2000. IDC ranks it first in vulnerability assessment solutions (VAS) with 28.7% market share. Rapid7, Qualys, and BGC Partners' GFI Software are lesser rivals.
Global Markets Insights predicts a 10% CAGR for the security and vulnerability management industry from 2023 to 2032. Analysts predict Tenable's sales to grow 15% from 2023 to 2026. Those predictions suggest Tenable can still beat its sector counterparts, but its high-growth days may be finished.
Tenable's non-GAAP operating margin rose from -12% in 2019 to 15% in 2023 as it cut spending and benefited from economies of scale. It became profitable on a non-GAAP basis in 2020 and grew 67% from 2020 to 2023. Analysts predict 35% non-GAAP EPS growth in 2024 and 23% in 2025.
Could Tenable stock make a millionaire? Tenable's 43 ahead multiple may seem excessive given Qualys and Rapid7 trade at 32 and 23 times forward earnings, respectively. Tenable is growing faster than those smaller companies and is cheaper than Palo Alto Networks, which is developing similarly but trades at 55 times forward profits.
Tenable's stock might reach $200 in 10 years if its valuation maintains consistent, it meets Wall Street's expectations, and it grows its EPS at a 15% CAGR from 2025 to 2034. It wouldn't be a millionaire-maker stock, but a $10,000 investment would yield approximately $44,000.
The secular growth of the cybersecurity business makes Tenable a solid play, but growth-oriented investors won't be impressed soon. Investors should focus on gaining larger enterprise customers, expanding its ecosystem through acquisitions, and maintaining its VAS market leadership for now. If successful, it might grow into a larger, more diverse cybersecurity organization over the next decade.
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