It’s only May, but 2022 has been brutal for stock market investors. Those who favor tech companies have the worst, with the Nasdaq 100 Technology index officially in a bear market down nearly 21% from its all-time high set in November last year.
But there are always bright spots in the market, even in the struggling tech sector. Defensible (TENB -8.22%) is an industry-leading cybersecurity company, and it’s sitting on a 4% gain for 2022. That may not seem like much, but given the Nasdaq’s steep losses, Tenable is clearly outperforming its tech peers.
Here’s why it could continue to crush the broader market.
Fight the greatest threat of all
Each year, global consultancy PricewaterhouseCoopers surveys CEOs around the world to find out what makes them optimistic about the future and what they perceive to be their most important business challenges.
When presented with a list of potential threats to their businesses over the next 12 months, these leaders ranked cybersecurity risk as their top concern. He beat out other options like economic volatility and climate change.
It’s no surprise companies are turning to cybersecurity specialists like Tenable, which offers a suite of advanced threat detection tools. In fact, its Nessus platform is the most widely deployed vulnerability management software in the industry, protecting 30,000 organizations and racking up over 2 million downloads.
Nessus is ranked #1 in coverage, protecting against over 69,000 common vulnerabilities and exposures. It also ranks first in accuracy, with the lowest false positive rate in the cybersecurity industry. Tenable has successfully leveraged the success of Nessus in a portfolio of specialized security products, focused on risky sectors like manufacturing and financial services.
Big spenders lead the way
Tenable has grown its annual revenue at a compound rate of 34% since 2016. In its recent Q1 2022 earnings report, the company also released a full-year revenue guidance of 676 million, which represents a slightly slower growth of 22% compared to 2021.
But there is evidence that the appetite for advanced cybersecurity tools is growing at a much faster rate within large organizations. Tenable’s growth in the number of customers who spend at least $100,000 per year with the company paints a very clear picture.
If this trend continues, Tenable has the opportunity to operate on a much larger scale over time. It is more profitable for the company to generate $1 million in revenue from 10 large clients, as opposed to 100 smaller ones. This requires less support staff, less money spent on marketing, fewer contracts, and therefore less legal costs. These savings could be diverted to research and development, or possibly be applied to the bottom line over time.
Wall Street is betting on more strength
Tenable has garnered a rather rare consensus on Wall Street. Of the 18 analysts covering the stock, not one recommends selling. They are all bullish, with 17 rating the company as a buy and one assigning an overweight rating.
Looking at the shorter term, Tenable delivered a strong performance in the first quarter of 2022. It grew revenue 29% year-over-year and total billings 31%, the latter of which may exceed 770 million by the end of 2022. are expected to eventually convert to revenue, giving investors insight into Tenable’s future sales.
In a volatile environment like the present, Wall Street likes to see profits. Tenable made non-GAAP earnings of $0.34 per share in 2021, and followed that with $0.06 in the first quarter of 2022. The company is still investing in growth, but its ability to do so while now profitability is probably a big reason why the stock has been in favor this year.
Broader market turmoil could continue into 2022 due to rising interest rates and geopolitical tensions, so Tenable could be the most stable portfolio many investors seek. After all, the continued digitization of the economy means that cybersecurity risks are not expected to disappear any time soon, especially for large enterprises.