By Rick Walter
Updated: 02/13/2020
Cyberark Software Ltd., CYBR stock cratered today after their earnings announcement. I listened in on the company’s webcast on Thursday and the presentation was pretty solid. There was nothing in the webcast that was materially incorrect or shockingly bad. The company reported solid numbers in revenues, gross margins, r & d, sales and marketing, and general and administrative expenses, yet the stock sunk like a stone in a sea of positive earnings announcements.
The company reported earnings per share of .97 per share versus expected fourth-quarter earnings per share of .81 per share, a 20% increase. Revenues came in at $129.66 million versus expected revenues of $126.67 million, 2.36%. Year over Year (Y/Y) revenues were up 27.72% with net income also up 88.39%.
From a valuation metric, the stock was fairly valued as of Wednesday’s price of $138.60. Today’s collapse puts the stock in undervalued territory by at least 10% based on current valuation computations.
We believe based on the line of questioning by analysts on the earnings webcast, that there may be some confusion on whether the company grew earnings per share and revenues by actually adding new customers or manipulated their numbers by reformulating or remixing the pricing of their existing product and product solutions to generate higher revenue fees thereby increasing fourth-quarter earnings per share and revenues.
Is the stock still a buy? We think so based on year over year numbers and because the stock fits our criteria for investment based on their innovative cyber-security products, consistent earnings per share growth and excellent risk management stewardship. However, proceed cautiously.